KUALA LUMPUR: The current net foreign selling will likely to continue next week with investors adopting a wait-and-see attitude weighed by the uncertain external development especially the outcomes from the US Federal Open Market Committee (FOMC) meeting.
Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said foreign investors would likely be very selective over their asset allocation, given the prospect of lower US interest rate coupled with the possible escalation of the US-China trade war.
He said foreign investors were mostly cautious in the local equity market during last week after turning into net sellers amounting to RM24.4mil against net buyers of RM214.2mil in the week before.
The average foreign fund participation ratio increased to 25.3% versus 23.7% previously, he said, adding that the trend was expected to continue, at least in the coming week as they closely monitor the outcomes of the FOMC two-day meeting that would commence on July 30.
Mohd Afzanizam said the weakening of the US dollar suggested that there would be rate cut.
“We would see the first rate cut since end of 2008.
“Nonetheless, the economic outlook remains murky,” he elaborated.
He shared that central banks in South Korea and Indonesia had delivered 25 basis points cut in their respective policy rates this week in a bid to resuscitate the economy.
Meanwhile, high-frequency indicators in the US such as the non-farm payroll, core consumer price index and retail sales indicated the economy was still “okay”.
Therefore, the rate cut could wait, he projected.
Nonetheless, the recent remarks by one of the New York Fed chief, John Williams, indicated that the interest rate should be reduced. Fundamentally, Phillip Capital Management senior vice-president (Investment) Datuk DNazri Khan Adam Khan said it should be looked from a positive perspective as the domestic economic data showed strong signs of improving growth this year.
“We review any weaknesses now as an opportunity to enter cheaper (markets),” he said. Ultimately, the broader market stayed weak in tandem with key regional markets as investors brace for fresh economic data for more clues on the global growth, he added. — Bernama