This article first appeared in The Edge Financial Daily on May 25, 2018

KUALA LUMPUR: The foreign selldown that saw some RM2.48 billion local equities dumped last week in the aftermath of the 14th general election continued this week as foreign net selling throughout this week came up to RM812.2 million.

The foreign selling was reflected in the decline in the overall market, with the benchmark FBM KLCI erasing its year-to-date gain.

The market capitalisation of the index’s component stocks wiped off came up to RM43.1 billion in the first four trading days this week. A head of research with a local investment bank told The Edge Financial Daily foreign clients chose to exit in anticipation of uncertainties, including the investigation into 1Malaysia Development Bhd, but they believe the new government is setting the right tone for Malaysia’s long-term development.

“They are anticipating short-term pain, but believe that it’ll be good in the long term,” he said over the phone. The Malaysian stock market, however, was not alone in the decline as regional markets were mostly in the red as the trade dispute between the US and China was back in focus.

US President Donald Trump on Wednesday said any trade deal with China would need “a different structure” as the current framework used in trade talks with Beijing was “too hard to get done”, and that he was “not satisfied” with negotiations earlier in the week. Investors were on the alert as the Trump administration also launched an investigation into whether tariffs are needed on the import of automobile into the US. The White House said in a statement that Trump had asked Commerce Secretary Wilbur Ross to consider whether automotive imports, including trucks and automotive parts, threaten US national security.

Other than uncertainties on the trade front, emerging-market currencies were also a concern for investors amid a stronger greenback, rising US Treasury yields and the Turkish lira crisis.

Yesterday, Japan’s Nikkei 225 fell by 1.1% or 252.73 points to 22,437.01 after Nissan, Mazda and Toyota all skidded. China’s Shanghai Stock Exchange Composite Index was also lower by 0.45% or 14.31 points to 3,154.65 points, while South Korea’s Kospi slipped by 0.24% or 5.9 points to 2,466.01. Hong Kong’s Hang Seng Index was higher by 0.31% or 94.77 points at 30,760.41 points.

Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said the Malaysian stock market is facing a double whammy from both domestic and external uncertainties.

“I think it’s not just the change in government that is affecting investor confidence. It’s also due to the uncertainties on the external front,” Pong said, pointing to some of the trade dispute issues and the strengthening US dollar. On whether there is value emerging from the recent selldown, he said there are selective gems, especially in the oil and gas space which benefits from stronger oil prices. At the time of writing, Brent crude oil was trading at US$78.82 per barrel.