Foreign Shareholding – Foreign investments in Malaysian companies

20.3.09

We looked at major listed companies (>RM500m market cap) under our coverage
with foreign shareholdings. These stocks comprise 50 out of the 100 stocks
in the benchmark KLCI.

By value, we estimate that foreign holdings have dropped by around 46% yoy
from a combination of lower share prices (-32% based on KLCI decline) and
disposal of shareholdings (around RM25-30bn).

Notwithstanding the lower foreign shareholding levels, we estimate that
foreigners still own RM67bn or around 15% of the KLCI stocks’ total market
cap (excluding strategic holdings). 55% of this foreign-held value is in
the top 10 stocks (by market cap) under our coverage. We note that trading
of just 1% of these foreign-held shares would be equivalent to the average
daily turnover (by value) on Bursa Malaysia for the year to date.

While we remain cautiously optimistic about a recovery for the equity
market starting around end-2009/early-2010, we highlight that foreign
portfolio investors could still influence the direction of the KLCI.
Moreover, Malaysia is currently still outperforming regional equity
markets, but this may reverse if other markets begin to recover.

We highlight that external factors remain dominant and this will likely
continue to lead the equity market in the near term. Our top picks (BCHB,
AMMB, Resorts World, TNB, Tanjong and Top Glove) are unchanged and
represent stocks that are fundamentally strong and undervalued.