Foreign funds sell RM3.8b shares in Aug

Overseas investors turned net sellers of Malaysian stocks in August for the first time in five months as the benchmark index posted its biggest monthly slump in almost three years.

Foreign funds unloaded RM3.8 billion (US$1.3 billion) of Malaysian shares in August, the most this year, after four consecutive months of inflows, according to data on the Kuala Lumpur stock exchange’s website.

“There could still be some near-term downside potential as August’s net activities reversed out just 58 percent of the total net foreign buying in April-July,” Wong Chew Hann, an analyst at Maybank Investment Bank Bhd. wrote in a report today.

The benchmark FTSE Bursa Malaysia KLCI Index tumbled 6.6 percent last month, the steepest drop since October 2008, amid concerns over global economic growth as Europe’s debt crisis spread and Standard & Poor’s cut its rating on U.S. credit. The stock gauge traded at 14.3 times estimated profit at the end of August, the lowest level since May 2009.

Foreign ownership in Malaysian equities declined to below 22 percent at the end of last month from 22.1 percent in July, according to Maybank’s report.

“We expect volatility to persist with growing uneasiness in the Eurozone and U.S,” Wong wrote. “We remain defensive at the core, expecting a rebound towards year-end to lift the KLCI closer to our recently revised 1,520 target.”

The stock gauge dropped 0.5 percent to 1,456.07 as of 11:04 a.m. local time. It has fallen 4.1 percent this year. -- Bloomberg