July 28 (Bloomberg) -- Malaysia’s stock market is a “safe refuge” for foreign investors seeking shelter from volatility in other Asian markets because of its domestic economy and defensive qualities, JPMorgan Chase & Co said.
Investors should buy “cyclical” stocks such as banking group AMMB Holdings Bhd., Public Bank Bhd., and power utility Tenaga Nasional Bhd., Chris Oh, an analyst at JPMorgan, said in a report yesterday. Casino operator Genting Bhd. and IJM Corp., a builder, are also among his top picks.
The Malaysian market has “defensive characteristics such as low volatility and weak correlation with major indexes,” he said. “The market is back on a high; we see evidence of foreign monies trickling in based on foreign incremental buying and ownership levels.”
Foreign ownership in Malaysia’s market rose to 20.6 percent at the end of June from 20.3 percent in February, signaling a pickup in net buying by foreigners, Oh said.
The FTSE Bursa Malaysia KLCI Index slid 0.5 percent in the second quarter, the second-worst performance in Southeast Asia. The measure rose for a fourth day today, increasing 0.2 percent to 1,354.99 as of 11:08 a.m. in Kuala Lumpur, set for its highest close since Feb. 29, 2008.
Prime Minister Najib Razak said on June 10 the government aims to almost halve its budget deficit in the next five years as it widens its tax base and reduces expenses under a plan to make the economy more competitive, while increasing investments in infrastructure projects including highways and rail. The government removed fuel and sugar subsidies this month to help save more than 750 million ringgit this year.
The economy grew 10.1 percent in the three months ended March 31 after emerging from last year’s recession. It may expand 4.5 percent to 5.5 percent in 2010, the central bank forecast on March 24. Najib also said earlier this month that “external factors” may hurt growth in the Southeast Asian nation in the second half.
Second-quarter earnings are expected to remain “robust” and the government is expected to announce the second part of its economic and structural reforms next month, which may spur the stock market, Oh said.
The announcement will “provide greater granularity on the structural reform policies needed to put Malaysia on a higher growth trajectory,” he said.
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