Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on February 13, 2018

KUALA LUMPUR: A reversal of trend occurred last week as there was an exodus of foreign funds from stocks listed on Bursa Malaysia after six straight weeks of buying, according to MIDF Research.

Based on preliminary data from Bursa, which excluded off-market deals, the research firm estimated that international investors withdrew RM1.75 billion net of local equities last week — wiping off around 92% of the net inflows worth RM1.92 billion accumulated in the previous three weeks.

“This was the first weekly attrition in seven weeks and the highest since August 2013, the year of the 13th General Election,” its analyst Adam M Rahim said in its weekly fund flow report yesterday.

“Foreign funds were net sellers on all five trading days last week. [Last] Tuesday saw a net outflow of RM868.6 million net, the largest attrition in more than four years, coinciding with FBM KLCI’s biggest single day drop since December 2014 of 2.19% to a 23-trading-day low at 1,812 points,” he added.

However, Adam said this came as no surprise as investors fled from equities spooked by the rise in US bond yields in the week before and following Wall Street’s turmoil on Feb 5.

Thereafter, foreign selling levels normalised to levels ranging from RM130 million to RM160 million net last Wednesday and last Thursday as investors shrugged off data which showed Malaysia’s exports rose at a much slower pace for the second straight month following overnight gains on Wall Street.

However, foreign selling rose back to a high level of RM323.3 million net last Friday as Dow Jones declined by more than 1,000 points for the second time in a week, he said.

Despite the accelerated momentum of selling activity, Adam said foreigners mopped up RM1.86 billion net during the first six weeks of 2018 compared with RM612.8 million net during the same period in 2017.

“Foreign participation remained vibrant as the foreign average daily trade value stood at RM1.6 billion, marking its sixth week of being above the RM1 billion threshold.

“Meanwhile, the strong foreign selling momentum paved the way for local fund managers to acquire RM1.8 billion net, a level not seen since November 2016,” added Adam.

Globally, MIDF Research pointed out that it was a rather volatile week for global equity markets worldwide last week as they remained in the red zone for the second week running.

“Wall Street faced a disastrous start [in the week before] last week with the Dow Jones losing 1,175 points [last] Monday to settle below the 25,000 level coinciding with Jerome Powell’s first day as the US Federal Reserve’s chair, the largest drop ever based on pure points in the history of Dow Jones.

“The original trigger for the reduction was the sharp rise in US bond yields in the preceding week, amid concerns about imminent rate hikes this year,” said Adam.

Nevertheless, he noted that US stocks finished the hectic week with a burst of buying, lifting the S&P 500 and Dow Jones by 1.5% and 1.4% respectively last Friday, but still posted their worst week in two years.

Adam said the pace of foreign funds leaving Asia also shifted to a high gear last week. “Based on the provisional aggregate data for the seven Asian exchanges that we track, investors classified as foreign offloaded US$7 billion (RM27.72 billion) net last week, almost four times the amount disposed in the preceding week, marking the second week of net outflows,” he added.
 

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