Net foreign selling continues for third consecutive week

KUALA LUMPUR: Malaysia continued to experience net foreign selling for the third consecutive week as investors shifted their asset allocation into safe havens such as bonds and money market.

This was due to the bearish scenario in the global market which has a far more significant impact than internal factors.

Bank Islam Malaysia chief economist Dr Mohd Afzanizam Abdul Rashid said in fact, net selling during the first four days of this week (April 8-April11) amounted to RM162.8mil, a decline from RM291.9mil in the same period last week.

“Retail investors are the main buyers in Bursa Malaysia at RM110.1mil during April 8-April11, a rebound from RM11.3mil worth of sales from April 1-April 4.

“The local institutions’ participation in the local stocks stood at RM52.8mil between April 8 and April 11 compared with RM303.2mil between April 1 and April 4,” he told Bernama.

He said outflows may feature in the near term but the main trigger would be external developments such as the terrible outcome of Brexit, the dovish stance among the major central bankers, as well as the recent downward revision in global growth by the International Monetary Fund (IMF).

“Naturally, during such period, investors would be very defensive, leading to higher demand for safe haven securities such as fixed income instrument,” he said.

Meanwhile, Phillip Capital Management senior vice president (investment) Datuk Dr Nazri Khan Adam Khan said the drop in the net selling value on a week-to-week basis was underpinned by local factors including better commodity prices, ringgit stabilisation and the expectation of better gross domestic product for the second quarter of this year.

He told Bernama that on a year-to-date basis, foreign funds had sold RM1.8 billion net of local equities.

“Looking at the effect on Bursa Malaysia which will likely to see a technical rebound next week, it is expected that there will be a net foreign funds buying of five per cent, driven by rising commodity prices as well as the unchanged interest rate,” he said.

As for the ringgit movement for the week under review (April 8-11), the disappointing Industrial Production Index data for February 2019, which grew only 1.7 per cent year-on-year, coupled with the downward revision of the global growth forecast by IMF, had dragged the ringgit to hit a 10-week low of 4.1120 against the US dollar.

However, a financial analyst who requested anonymity said the news on the resumption of the East Coast Rail Link (ECRL) announced by the Prime Minister’s Office would provide impetus to the ringgit. — Bernama

Markets , bonds