Foreign buying of local equities extends to third week

This article first appeared in The Edge Financial Daily, on July 9, 2019.
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KUALA LUMPUR: International investors snapped up stocks listed on Bursa Malaysia for the third consecutive week last week, with net buying rising 34% to RM230.2 million from RM171.7 million in the prior week, according to MIDF Amanah Investment Bank Bhd Research (MIDF Research).

In his weekly fund flow report yesterday, MIDF Research’s Adam M Rahim said the week started with international funds acquiring RM114.38 million net of local equities last Monday, as risk appetite was bolstered by the US and China agreeing to resume trade negotiations during the Group of Twenty summit in the preceding week.

Also, despite more tariffs proposed by the US on US$4 billion (RM16.56 billion) worth of goods from the European Union, foreign net buying intensified last Tuesday to RM143.8 million net, a level not seen since June 3, Adam said. This was in conformity with regional peers — Thailand and Indonesia, according to him.

“The local bourse followed suit rising 0.4%, cancelling its year-to-date (YTD) loss for the first time since March 18, 2019.

“Last Wednesday, foreign net buying slowed down substantially to RM12.6 million net, but marked the sixth straight day of a buying spree,” he said.

However, trade optimism waned thereafter as concerns rose again over a trade dispute, this time between Korea and Japan, he said.

“The tables were turned last Thursday and Friday with foreign funds taking out RM17.4 million net and RM23.3 million net of local equities respectively as investors locked in gains, while economic data showed Malaysia’s export growth doubled to 2.5% year-on-year (y-o-y) in May 2019 from 1.1% y-o-y in April 2019.

“Last week’s foreign net inflow brings the year-to-date foreign net outflow from Malaysia to RM4.43 billion,” he said. Net outflow for the first half of the year was previously reported at RM4.46 billion.

In contrast, Adam said other Asian markets that MIDF Research monitors — South Korea, Thailand, Indonesia, India, Taiwan and the Philippines — have recorded foreign net inflows so far this year.

This was despite foreign buying coming to a halt last week in these Asian markets, as international funds took out some equities albeit at a manageable pace.

“Based on the provisional aggregate data for the seven Asian exchanges that we track, investors classified as ‘foreign’ sold US$86.7 million net last week compared with US$1.95 billion net bought in the week before.”

Globally, Adam said most equity markets ended the week in the green zone as the US and China’s move for another round of trade talks stoked the risk-on mood.

Back to Bursa, in terms of participation, he said the average daily traded value (ADTV) of foreign investors declined 13.7% to RM891.6 million for the week, below the healthy threshold of RM1 billion.

“Meanwhile, retail investors and local institutional funds recorded an increase in their ADTV by more than 20% for the week.”