This article first appeared in The Edge Financial Daily, on September 29, 2015.

KUALA LUMPUR: Malaysia succumbed to the heavy tide against emerging markets last week, and what had been hoped to be a promising, sustainable turnaround turned out to be ephemeral as investors classified as foreign sold heavily in the local equity market, according to MIDF Research.

In his weekly fund flow report yesterday, MIDF Research head Zulkifli Hamzah said investors classified as foreign offloaded RM1.27 billion net in the open market despite it being a holiday-shortened week.

Last week’s attrition raised the cumulative net foreign outflow this year to RM17.7 billion, significantly surpassing the RM6.9 billion outflow for the entire 2014, he noted.

The outflow last week was also the fifth week this year that the amount exceeded RM1 billion and the fact that selling remained heavy last Friday, “is rather ominous for the market this week”.

He also said last week’s outflow more than reversed the amount of inflow recorded in the preceding week of RM685 million, implying that any fund making its way to Malaysian equities currently is highly volatile in nature.

He also said the outflow last week was clearly driven by apprehensions over emerging markets as a whole.

“The writings were already on the wall on Monday (last Monday) as foreigners pulled out RM333.9 million net, the highest in 17 days and also coincidentally the 17th time that the amount exceeded RM300 million this year.

“On Wednesday (last Wednesday), the situation turned rough as foreign investors sold a whopping RM546.6 million. That was the highest recorded in a single day this year, and only the second time it exceeded RM500 million since the beginning of 2014,” he said.

Zulkifli said foreign participation rate was easier but stayed elevated last week.

He said the average daily gross volume was RM1.08 billion, compared with RM1.51 billion the week before. Last Wednesday, the volume was only RM1.24 billion, despite the high net sale amount.

“Local institutions supported the market, mopping up RM1.12 billion net on RM2.17 billion participation rate.

“Interestingly, retailers bought rather heavily, mopping RM145 million, the highest in a week this year,” he said.

Although participation stayed moderate at RM704 million, many retail investors were seeing value at current market level, he further noted.

On global markets, Zulkifli said it was a bad week for the equity markets and the performance last Friday suggests that things are not about to change for the better.

“It was a case of a sudden reversal. Foreign funds made a hasty exit from Asian equities last week, soon after chalking up a promising inflow the week before.

“Selling was aggressive across all markets. Hardest hit was the more developed North Asian markets of Taiwan and Korea,” he said.