Dr Wee urges Putrajaya to act as their participation drops to historic low
KUALA LUMPUR: With foreign investor participation in Malaysia’s stock market falling to a historic low of 18.1% in August, the government needs to spell out concrete measures to restore confidence and stem the persistent outflow of foreign funds, says MCA president Datuk Seri Dr Wee Ka Siong.
The concern is not new, with foreign investors having steadily reduced their exposure to Malaysian equities since the 2018 general election.
But the latest figures suggest the problem has reached a new low, raising questions over whether existing measures are sufficient to reverse the trend, he said.
“Foreign funds continued to exit Malaysia in September, with about RM640mill flowing out in the first week and another RM160mil in the second week,” he said.
Since May 2018, he said about RM84.5bil in foreign funds has reportedly flowed out of Malaysia.
The annual outflows have also remained substantial. About RM2.3bil left the market in 2023, followed by RM4.2bil in 2024 and RM22.5bil last year.
In 2026, foreign funds outflow had reached RM5.3bil as at Sept 11.
In the four years under the Madani government, he said a total of RM34.3bil of net outflows were registered.
Dr Wee pointed out that the continued withdrawals are raising concerns over the growing reliance on domestic institutions and government-related funds to support the market.
While local funds can provide liquidity and cushion the impact of foreign selling, he said they cannot replace the role of international investors in creating a deep, liquid and healthy stock market.
“A healthy stock market needs real confidence, not just local funds,” he said.
The issue, he said, goes beyond merely attracting fresh capital.
Sustained foreign participation is also an important indicator of how international investors view Malaysia’s economic prospects, policy environment and capital market.
The sharp decline in foreign participation comes after years in which Malaysia had been seen as one of the region’s more established equity markets.
He contrasted the country’s earlier period of strong market performance with its current position, describing the market as having gone from one of the longest bull runs to “rock bottom”.
Dr Wee believed local institutions may be able to absorb some of the selling, but this does not address the underlying issue of investor confidence.
The government therefore has to demonstrate that it has a clear strategy to reverse the trend, rather than relying primarily on domestic funds to support the market, he said.
He called for policymakers to provide answers on how they intend to restore foreign investor confidence, particularly as foreign participation has continued to decline despite Malaysia’s efforts to position itself as an attractive investment destination.
