Foreign funds start coming back, with political confidence


  • Investment
  • Tuesday, 15 Sep 2020

The better fund-flow is largely due the country’s political environment which has improved investors’ confidence over Malaysia’s equity market, said Bank Islam Malaysia Bhd economist Adam Mohamed Rahim

KUALA LUMPUR: After a month of outflow, foreign investors have turned buyers during last week, injecting RM71.2mil net of equities into the local market against RM589.4mil net sold during the whole of the previous week.

The better fund-flow is largely due the country’s political environment which has improved investors’ confidence over Malaysia’s equity market, said Bank Islam Malaysia Bhd economist Adam Mohamed Rahim.

“We are going to see the Sabah state election soon, which I believe signals a political certainty, ” he told Bernama.

International investors began the week by withdrawing RM72.3mil net of local equities on Sept 7 following the slump in China and Hong Kong’s stocks after a US official cautioned that the country was considering adding Hong Kong-listed Semiconductor Manufacturing International Corp to a trade blacklist.

The level of foreign net selling dropped to RM11.5mil last Tuesday despite US President Donald Trump raising the prospect of a decoupling of the country’s economy from mainland China.

The slower momentum of foreign net outflow coincided with the benchmark index FBM KLCI’s 0.2% gain after a final-hour spike helped the index erase earlier losses, pushing the equity gauge to below 1,500, amid a confluence of factors including lower crude oil prices and in anticipation of Bank Negara’s interest rate decision.

According to Adam, foreign funds made a return to Bursa Malaysia last Wednesday as they acquired RM58.9mil net of local equities, dodging a tech sell-off on Wall Street overnight.

“Nevertheless, local institutional funds took out RM249.2mil local equities on the same day, amid concerns of a possible delay in the development of the Covid-19 vaccine.

“As such, the local bourse closed below the 1,500 mark at 1,496.7 points, a level not seen since late June this year, ” he said.

The momentum of foreign net buying accelerated to RM94.8mil on Thursday after a rebound of US stocks overnight from a three-day rout with dip buyers pouring into beaten-down tech shares to send the Nasdaq 100 to its best day since April.

However, the FBM KLCI marginally dropped by 0.4% the same day with a sell-off in glove counters, offsetting Bank Negara’s decision to keep the overnight policy rate unchanged at 1.75%, which is positive for the banking sector in terms of net interest margins.

Adam said foreign net buying activity took a breather on Friday to reach RM1.3mil net as bargain-hunting activity in glove counters was partially dampened by another technology sell-off on Wall Street overnight.

Nevertheless, the local bourse advanced 1.0% to close above 1,500 points last Friday, he said.

On a year-to-date basis, foreign funds have taken out RM20.85bil net of local equities, exceeding the RM19.49bil foreign net outflow in 2015.

In comparison with Asean peers, namely Thailand, Indonesia and the Philippines, Malaysia has the second largest foreign net outflow after Thailand which registered a year-to-date foreign net outflow of US$8.22bil.

On a Friday-to-Friday basis, the FBM KLCI ended 11.01 points easier at 1,504.85 compared with 1,515.86 previously. — Bernama

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