Foreign funds outflow appears to be easing

by **Cals** Tue 18 Feb 2014, 07:23

Posted on 18 February 2014 - 05:38am

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PETALING JAYA (Feb 18, 2014): The outflow of foreign funds eased to RM760.2 million last week even though the size of outflow is still significant, according to MIDF Research.

Foreign funds outflow of stood at RM1.1 billion the week before.

In a report yesterday, head of research Zulkifli Hamzah said the liquidity tide in this region is reversing as the foreign funds has made an abrupt turnabout after selling aggressively two weeks ago.

"Foreign sale of Asian stocks dwindled significantly last week. Compared with US$4.4 billion (RM14.5 billion) offloaded the week before, foreign funds sold only US$64 million net of equity in the seven Asian markets, namely Korea, Taiwan, Thailand, Malaysia, Indonesia, Philippines and India," he said.

Closer to home, the daily outflow was capped at below RM250 million for the first time since the first week of trading this year, said Zulkifli.

So far in 2014, he said, daily net sale exceeded the RM500 million level only once compared with six times in 2013. It was in the RM300-RM500 million bracket only three times, compared with 11 times in 2013.

Year-to-date, a total of RM5.54 billion of foreign money had exited local equity. In the last 19 weeks, a total of RM11.21 billion of foreign money had exited, translated into an average of RM590 million a week, an increase from RM580 million the week before.

Meanwhile, the average daily foreign participation rate dropped abruptly to only RM790 million, after surpassing the RM1 billion for four consecutive weeks.

"Foreign participation rate was the lowest in six weeks, this is another indication that the intensity of foreign selling is tapering," Zulkifli explained.

On the contrary, the retail investors' daily participation rate surged last week to RM979 million, the highest since November 2013.

Zulkifli however attributed this to profit-taking by the early birds, as overall, retailers were net sellers, albeit marginal at only RM40 million.

On another note, Zulkifli opined the local stock market has overcome the difficult hurdles this year and better days ahead beckon.

"For Malaysia, the latest numbers on the current account and the government's fiscal position show good improvement and are reasons for investors to cheer," he said.

The FBM KLCI gained for the third successive week to close at 1819.4 points last week. For the year, the benchmark index is still in the redzone, having lost 2.5%.

Zulkifli said small and mid-cap stocks had a good week and he expects the momentum to continue, due to healthy and rising retail participation, technically bullish indicators as well as improving broader sentiment towards equity.