KUALA LUMPUR: Foreign investors were net buyers in the local equity market last week, recording a total net inflow of RM23.48 million from Jan 20-23 compared with RM63.66 million from Jan 13-16 as markets remained fragile amid concerns over the 2019 novel coronavirus outbreak.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the average participation rates for foreign and local institutions stood at 18.4 per cent and 54 per cent, respectively, against 25.08 per cent (foreign institutions) and 46.91 per cent (local institutions) in the same period the previous week.
Speaking to Bernama, he said markets were cautious about the coronavirus which stemmed from Wuhan, China, throughout last week, ahead of the Chinese New Year holiday.
"Healthcare and gloves-related stocks were making positive gains during the week, ” he noted, adding that markets also reacted towards Bank Negara Malaysia's (BNM) surprise move to cut the overnight policy rate (OPR) by 25 basis points to 2.75 per cent.
Subsequent to the cut, Mohd Afzanizam said, banking-related stocks were negatively affected as concerns over their net interest margin resurfaced.
On Jan 22, BNM's Monetary Policy Committee decided to reduce the OPR as a pre-emptive measure to secure improving growth trajectory amid price stability.
In a statement, the central bank said downside risks remained due to geopolitical tensions and policy uncertainties in a number of countries, although monetary easing across major economies in the second half of 2019 had helped ease financial conditions and was expected to continue to support economic activity.
"This (the tensions and uncertainties) could cause a resurgence of financial market volatility and weigh on the global growth outlook, ” BNM said.
Following the reduction in the benchmark interest rate, the ceiling and floor rates of the corridor of the OPR were correspondingly reduced to 3.00 per cent and 2.50 per cent, respectively.
Moving on, Dr Afzanizam said, markets would continue to pay close attention to the extent of the coronavirus spread.
Last Thursday, a World Health Organisation (WHO) committee indicated that the current event did not constitute a "public health emergency of international concern.”
However, WHO director-general Tedros Adhanom Ghebreyeus said he would reconvene the committee in a matter of days should the situation worsen.
This week, the market will also be looking on the US Federal Open Market Committee meeting starting tomorrow to see how the Federal Reserve is assessing the economy especially after the signing of the US-China "phase one” deal on Jan 15.
"So it is quite a mixed feeling. Perhaps the FTSE Bursa Malaysia KLCI (FBM KLCI) would linger in a tight range next week (this week), ” Mohd Afzanizam said.
The FBM KLCI is anticipated to trade between the 1,551 and 1,580 marks in the near term due to suppressed upward momentum. - Bernama
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