SINGAPORE (Jan 31): It’s time that investors in Malaysian stocks pay more attention to local funds.

That’s according to AllianceDBS Research Sdn Bhd. The nation’s equities have little room for further losses, as the ratio of stock-market value to onshore money supply has reached a “compelling level,” analyst Quah He Wei wrote in a note. He also cited relatively healthy economic growth and muted expectations for the upcoming earnings seasons.

The pace of selling by foreigners has also become “subdued” as their holdings reached an estimated low of 23%, Quah noted. Malaysia’s stocks saw almost US$2.9 billion of foreign outflows last year, which have flipped to a US$235 million of inflows so far in 2019, according to data compiled by Bloomberg.

The FTSE Bursa Malaysia KLCI Index has underperformed the MSCI Asean Index this year, after outperforming the regional gauge in 2018. Quah expects the country’s benchmark to rise to 1,800 by the end of 2019, implying a 6.9% gain from Wednesday’s close.

Quah is betting on oversold stocks, companies that benefit from the new government’s policies and trade-war winners. His top picks include AMMB Holdings Bhd, Time dotCom Bhd, Hong Leong Bank Bhd, Gamuda Bhd, Matrix Concepts Holdings Bhd and CapitaLand Malaysia Mall Trust.