In a retail research note Tuesday, Affin said despite the Hari Raya holiday mood, it expects “FBM KLCI to trend higher towards 1650 level riding on improved global sentiment, rising foreign buying and Budget 2013 rotation play”.
It noted that the global stocks are holding well near their three months high despite negative global data suggest short term resilience.
“We believe stronger Bursa performance in the near term due to the stronger than expected foreign buying despite a weakening ringgit against the US dollar…In the last one month (July 2012), foreign investors have turned net buyers with an accumulated net buying of RM3.1b, recording a new high in the accumulated foreign net buying position of RM11.6b since September 2011.
“We believe the strong foreign inflow is due to continuous Economic Transformation Programme (ETP), continuous capital market liberalisation initiatives done by the government and various domestic catalysts such as the launching of RM26 billion Tun Razak Exchange.”
Affin also said there are signs of portfolio rebalancing with funds moving ahead of the Budget 2013 towards higher yield stocks.
“In the past one month, we saw the trend of flight to defensive/dividend stocks continues to be the prime investment strategy amidst global uncertainties. This can be seen from the outperformance of the consumer, telco and REIT sectors against the FBMKLCI in general. It is clearly seen that FBMKLCI component stocks gained 2.2% on average in the past one month while the mentioned sectors gained 5.2 % on average.”