Highlight Foreign selling on Bursa could be tapering, says MIDF Research

by **Cals** Mon 25 Nov 2013, 14:12

Highlight Foreign selling on Bursa could be tapering, says MIDF Research

Business & Markets 2013

Written by Surin Murugiah of theedgemalaysia.com

Monday, 25 November 2013 11:26

KUALA LUMPUR (Nov 25): Foreign selling on Bursa in the open market (i.e excluding off-market deals) may be tapering despite continuing for seven weeks as the amount for the week ended Nov 22 was only RM525 million compared with RM1.39 billion a week earlier, according to MIDF Research.

In his weekly fund report Monday, MIDF Research head Zulkfili Hamzah said that in the last seven weeks, RM3.5 billion net of foreign portfolio capital had left Malaysian equity.

He said during the six continuous weeks (from 29 Jul - 6 August) of net outflow triggered by the Fed’s tapering decision, a staggering total of RM8 billion of foreign money exited the market.

“There is a strong expectation in the market that the overnight policy rate (OPR) will be increased in 2014 in view of the rising inflation. However, most of the inflation in 1H14 will be cost-induced.

“This, in our opinion, will not be a basis for the central bank to raise the OPR. As economic growth gains momentum, we expect the pressure of demand on prices to emerge in 2H14. Only then do we expect any OPR action to happen,” he said.

Zukifli said the overhang of foreign portfolio capital which entered the Malaysian equity market in 2013 remained high at RM5.2 billion.

He said that at its peak, a cumulative total of RM18.8 billion had entered the local bourse this year, explaining that RM13.6 billion flowed out, leaving RM5.2 billion.

Since Jan 2011, the cumulative net inflow of foreign capital into Bursa is estimated to be at RM20.8 billion or US$7 billion (based on the weighted average exchange rate at the point of entry), he said.

“Foreign participation remained moderate last week, reinforcing our view that the outflow is tapering.

“Participation rate (average daily gross purchase and sale) was only RM845 million,” he said.

Zulkifli said local institutions showed aggressive presence in the market last week, asding that although they absorbed only RM411 million, compared with RM1.2 billion the week before, participation rate surged to RM2.3 billion, the highest in 12 weeks.

“Local retailers were also net buyers, snapping up RM113 million.

“The retail segment appears to be going through a buoyant spell now, with active participation, as total trade has exceeded RM1 billion for four consecutive weeks now,” he said.