Foreign outflow continues in sombre start to 2019

This article first appeared in The Edge Financial Daily, on January 8, 2019.
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KUALA LUMPUR: Bursa Malaysia continued to record a net foreign outflow last week, albeit at a slower momentum of RM54.4 million versus RM127.6 million in the prior week, according to MIDF Amanah Investment Bank Bhd Research.

This extended the foreign selling streak to nine weeks, the research firm’s Adam M Rahim said in his weekly fund flow report yesterday.

On New Year’s eve, international investors sold RM36.1 million net on Bursa Malaysia following the drop in China’s factory activity for the first time since 2016, he said.

The stock market then kicked off 2019 in a sombre note, with foreign funds selling RM55.4 million on 2019’s first trading day on Wednesday, bringing the foreign net selling streak to 12 days, the longest since the 37-day selling spree recorded from early May to late June 2018, he said.

However, despite Apple’s slash in revenue guidance, foreign investors disregarded the news and took the opportunity to buy RM64.6 million net on Thursday, the largest daily inflow in more than two weeks,” he said.

But foreign funds reverted to selling mode on Friday, he said, albeit at a moderate pace of RM27.5 million net.

“The optimism sparked by the China’s services gauge was outweighed by disappointing US manufacturing data as the ISM manufacturing index fell to 54.1 last month, the lowest level since November 2016.

“For the first three trading days of 2019, foreign funds pulled out RM18.3 million net, or US$4.5 million, net of equities from Bursa Malaysia,” he said.

Nevertheless, this is substantially lower than Thailand’s outflow of US$130.4 million (RM534.3 million) net while Indonesia and the Philippines saw a net inflow of US$54.9 million and US$23.1 million, respectively, he said.

The participation among the various groups of investors saw an increase across-the-board, he said, with the average daily traded value of foreign investors registering the largest weekly advance of 36%, though it is still below the healthy level of RM1 billion.

Worldwide, Adam said, equity markets ended mixed last week as investors began the new year with a few yet impactful corporate developments, especially in the technology sector.

Though US stocks had a sluggish start to the New Year, they still managed to eke out gains on Wednesday, he noted.

“Apple then stole the attention of investors after the markets closed as the company slashed its outlook for the December quarter, attributing it to weak demand in China. Overall, for the week, the Dow Jones and S&P500 index gained over 1.5% amid better-than-expected jobs data,” he said.

Asian markets, meanwhile, saw an exodus of international funds last week.

“Based on the provisional aggregate data for the seven Asian exchanges that we track, investors classified as “foreign” offloaded US$1 billion net last week, wiping off the US$258.6 million net accumulated in the preceding week,” he added.