This article first appeared in The Edge Financial Daily on October 9, 2018

KUALA LUMPUR: International investors turned to selling mode last week albeit at a marginal pace, after three uninterrupted weeks of foreign net inflows into stocks listed on Bursa Malaysia.

According to MIDF Research analyst Adam M Rahim, international funds sold RM69 million net of local equities in the week ended Oct 5 — the second smallest weekly foreign net outflow recorded so far this year.

So far this year, Adam noted that the total foreign net outflow from Malaysia as of last Friday stood at RM8.6 billion, offsetting 86% of last year’s RM10.3 billion foreign net inflow.

Nevertheless, Malaysia still retains its position as the nation with the second lowest year-to-date foreign net outflow among the four Asean markets we track, he added.

“Bursa Malaysia saw a decent foreign net inflow of RM19.7 million on Monday (Oct 1) but was later cancelled off by a small net outflow worth RM36.2 million on Tuesday (Oct 2) despite the revised trade pact between the US and Canada,” said Adam in his weekly fund flow report yesterday.

“Foreign funds were on a roll on Wednesday (Oct 3) and Thursday (Oct 4) as they mopped up local stocks worth more than RM70 million on both days. Interestingly, foreign investors in other regional peers — the Philippines, Thailand and Indonesia — were reducing their exposure during the same period.

“However, offshore funds were back in selling mode on Friday at a heightened level of RM209.3 million net, the highest in 16 trading days. The local bourse followed suit to decline by 0.72% to 1,777 points on the same day, the lowest close since late July 2018,” he said.

He added that risk aversion was spurred by the rise in US 10-year treasury yields overnight which breached above 3.2%, a level not seen in seven years.

The participation of foreign investors dipped as its weekly average daily traded value ended 8.2% below the RM1 billion mark for the first time in 13 weeks.

Meanwhile, the participation in the retail market and local institutional funds remained healthy above RM800 million and RM2 billion respectively.

Regionally, Adam said, there was an exodus of foreign funds from Asian markets last week.

“Based on the provisional aggregate data for the seven Asian exchanges that we track, investors classified as “foreign” dumped US$3.65 billion (RM15.14 billion) net last week, the highest weekly foreign net outflow in 16 weeks,” he said.