This article first appeared in The Edge Financial Daily on January 3, 2018

KUALA LUMPUR: Foreign funds bought RM10.33 billion (US$2.36 billion) worth of equities listed on Bursa Malaysia in 2017, marking the first annual net inflow of funds since 2013, said MIDF Research.

The research house’s analyst Adam M Rahim said the 2017 net inflow offset some 35% of the total outflow of RM29.43 billion (US$7.63 billion) from 2014 to 2016. This amount is based on net transactions on the open market, excluding off-market deals.

In his fund flow report released yesterday, Adam said the RM10.33 billion inflow was the highest among the four Southeast Asian markets — Malaysia, Thailand, Indonesia and the Philippines — that MIDF Research tracks.

“This was the first annual net inflow recorded since the election year of 2013 and the biggest since 2012 which experienced an inflow of US$4.75 billion net,” he said. “Foreign funds were rather aggressive buyers in 2017, when Bursa recorded a net injection in 35 out of 52 weeks of trading during the year.”

Adam said from early February to June, foreign funds were net buyers for 18 straight weeks, the longest buying streak recorded since 2013 which had 21 weeks.

“The most outstanding day was on March 17, 2017 when foreign investors loaded up RM816.1 million net, coinciding with the FBM KLCI closing above the 1,740 level for the first time since June 2015, resulting in a monthly inflow of RM4.37 billion net for March 2017 amid election rumours.”

However, from August to November, Adam said foreigners retreated from Bursa as they dumped RM1.22 billion net during that period, due to escalating tensions in the Korean peninsula.

“Interestingly, the significant progress made for the US tax overhaul plan saw foreign funds making a comeback in December as they acquired RM959.9 million net,” he said.

After such heavy buying in 2017, Adam opines that foreign fund inflows would continue in 2018, especially after the 14th general election, as investors favour certainty in the market.

“Meanwhile, we also note that other external factors such as foreign investors’ views on external monetary policies could prompt the outflow of cheap money used by investors to enter emerging markets. However, we reckon the impact on the latter is expected to be minimal.”