This article first appeared in The Edge Financial Daily on October 3, 2017

KUALA LUMPUR: The ringgit declined the most in a week this year, as higher US Treasury yields boost the US dollar, and global funds sold the most Malaysian equities in 10 months last week, according to Bloomberg.

The US dollar rose 0.5% against the ringgit last week to 4.2308, the most since the period ended Dec 16 last year

The news agency wrote that while fundamentals are seeing a cyclical improvement, the ringgit is vulnerable to greater volatility due to geopolitical risks from North Korea or rate hikes in developed markets given its relatively weak external position.

Meanwhile, MIDF Amanah Investment Bank Bhd Research said foreign investors offloaded RM967.3 million of Malaysian equities last week — the highest weekly attrition recorded since the week ended Nov 18 last year — and more than double the RM477.7 million sold in the prior week.

In its weekly fund flow report yesterday, MIDF Research said “international sellers were net sellers on every single trading day last week”.

“As of last Friday, foreign investors had been selling for eight days straight, the longest selling spree since December last year,” it said.

It said foreign attrition peaked yesterday as foreigners sold US$254.8 million (RM1.08 billion), the largest outflow in a day so far this year, which coincided with the 0.2% dip in the FBM KLCI as North Korea perceived US President Donald Trump’s Twitter comments as a proclamation of war.

“For the month of September, cumulative foreign net outflow amounted to RM737.3 million, a second consecutive month of attrition.

“As a result, the cumulative net inflow thus far this year into shares listed on Bursa (Malaysia) was dragged down to RM9.61 billion, below the RM10 billion level. Henceforth, the number of weekly attritions has reached a double digit of 10,” it said.

On a quarterly basis, Malaysia is seeing a reversal in fund flow in the third quarter of this year, with a foreign outflow of RM558.3 million net — a stark contrast from the second quarter’s foreign net inflow of RM4.43 billion.

“[The] foreign participation rate gained momentum last week as the foreign average daily trade value (ADTV) surged by a staggering 46% to reach above the RM1 billion mark to settle at RM1.26 billion. Gross trade of foreigners was above RM1 billion on four out of five trading days,” it said.

The retail market, however, went the other way, with the ADTV falling 8% to below the RM1 billion mark.

Globally, MIDF Research said equity markets ended the week mixed amid a couple of market-defining events arising especially from the US.

It said Wall Street gained strong momentum last week mainly due to two major catalysts: i) US Federal Reserve (Fed) chair Janet Yellen’s hawkish remarks on rate hikes despite claiming that the Fed misjudged inflation and employment figures; and, ii) Trump’s latest proposed tax reform aiming to lower tax rates for corporates and small businesses and individuals within the high tax bracket.

It also noted Brent crude oil price reached US$59.02 per barrel last Monday, the highest since July 2015 as Turkish President Recep Tayyip Erdogan threatened to block oil exports of Iraqi Kurds following the referendum of Kurdistan’s independence from Iraq.

In Asia, it said global funds made an exodus from Asia, stretching the weekly withdrawal to its 10th consecutive week.

“The provisional aggregate data from the seven Asian exchanges that we track saw investors classified as ‘foreign’ offloading — US$2.60 billion net last week, the largest weekly withdrawal so far this year,” it added.