Global Longest Bull Run Endures Tumult as Foreigners Return
Comment of the Day

March 30 2016

Commentary by David Fuller

Global Longest Bull Run Endures Tumult as Foreigners Return

Here is the opening of this informative article from Bloomberg:

Malaysia’s energy exports are tumbling, its prime minister is battling corruption allegations and corporate profits are weakening. With all that, the Southeast Asian nation is also home to the world’s most resilient bull market for stocks.

Overseas funds are piling in at the fastest pace in Southeast Asia. Kuala Lumpur’s benchmark equity gauge has more than doubled from its 2008 lows without succumbing to a 20 percent drop. Tan Ming Han says he knows its secret: the lowest volatility among the region’s markets. It’s an environment where a growing army of investors are willing to miss out on the highest highs if that means they also avoid the biggest crashes.

“Sometimes, too much excitement can cause a panic attack -- especially with volatile markets,” said Tan, senior investment manager at Amundi Malaysia. “Boring is sometimes beautiful.”

Sentiment remains stubbornly buoyant in Malaysia, home to some of the region’s highest dividends, as the country’s $166 billion pension fund underpins demand for equities with share purchases. Even after the FTSE Bursa Malaysia KLCI Index climbed 12 percent from a three-year low in August, it trades near the cheapest relative to global equities in almost a decade.

David Fuller's view

South East Asia’s so-called ‘Little Tiger’ stock markets had been out of favour for a lengthy period but Malaysia’s KLCI (p/e 18.67 & yield 3.04%) bottomed in August 2015 with a big upside weekly key reversal following a plunge to almost 1500.  Currently, there is no evidence that this recovery is over and the 200-day (40-week) MA has turned upwards, although overhead supply is likely to be a headwind at somewhat higher levels.

Indonesia’s JCI (p/e 24.82 & yield 2.04) bottomed in late-September 2015.  It is still recovering but not cheap and overhead supply is likely to impede upward progress as it is more nearly approached.

The Philippines PCOMP (p/e 20.92 & yield 1.80) bottomed in late-January of this year and has performed well subsequently, although here also overhead supply is likely to be a headwind over the medium term. 

Singapore’s FSSTI (p/e 11.97 & yield 4.18) underperformed for a long time, not least following its April 2015 peak, before bottoming slowly in January-February of this year.  Nevertheless, it is inexpensive and remains a medium-term recovery candidate.  

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