Foreign funds continue to exit Malaysian equities

Foreign funds continue to exit Malaysian equities
Business & Markets 2013
Written by Fatin Rasyiqah Mustaza of theedgemalaysia.com
Tuesday, 20 August 2013 11:50

KUALA LUMPUR: Foreign funds continued to sell Malaysian equities. Some RM2.1 billion in equities were sold in the last three consecutive weeks, according to a report by MIDF Research yesterday.

Zulkifli Hamzah, head of MIDF Research, said foreign selling which started on July 25 took a breather last Tuesday. However, selling resumed the next day and turned heavy last Thursday.

"Foreign funds sold Malaysian equity last week, exiting the market in the last three consecutive weeks. However, the rate of outflow was still manageable," he said in his report.

Zulkifli expects foreign selling to continue this week in view of the weak sentiment towards equities globally, especially after the sell-off on Wall Street last Friday.

According to the report, foreign funds sold RM443.7 million, Malaysian equities in the open market (excluding off-market deals) last week, which was lower than the outflow of RM489.9 million the week before.

"In the last three weeks, a total of RM2.1 billion has left Malaysian equities," he said.

As at last Friday, the cumulative net foreign purchase of Malaysian equities in 2013 amounted to US$4.3 billion (RM14.1 billion), based on transactions in the open market. Hence, the overhang of foreign liquidity in the local market remained very high, Zulkifli noted.

He added that amid the selling, foreign participation in the market remained moderate.

"Last week, the foreign participation rate [average daily gross purchase and sale] was only RM800 million. Foreign selling is therefore happening in a rather gradual manner," he said.

Local institutions and retailers continued to support the market through the trade of RM428.7 million and RM15 million net, respectively last week.

"The local institutional participation rate was relatively high, but we note that the retail participation rate exceeded RM1 billion for the first time in four weeks. The market for retail-type of stocks is clearly active now," he added.

In the week ahead, Zulkifli sees emerging markets remaining in treacherous waters due to the spike in the US Treasury rates, the continued strengthening of the dollar and the sell-off on Wall Street last Friday.

"We would increase our level of caution this week. Small-cap stocks in particular, which have outperformed the big and mid caps post-Hari Raya Aidilfitri, may pause for a breather as the broader market turns cautious," he said.



This article first appeared in The Edge Financial Daily, on August 20, 2013.