KUALA LUMPUR (Jan 4): Malaysia recorded a net withdrawal of foreign funds from equities listed on Bursa Malaysia amounting to RM19.5 billion, or equivalent to US$5 billion, in 2015, according to MIDF Research.

In his weekly fund flow report today, MIDF Research head Zulkifli Hamzah said this was estimated based on net transactions in the open market.

"The US$5 billion outflow was the highest among the seven Asian markets that we track. It was also the most severe foreign attrition since the 2007/08 Financial Crisis.

"Foreign funds sold Malaysian equity from the opening day of 2015. The selling was pervasive such that Bursa reported net foreign injection in only 15 out of 52 weeks of trading during the year," he said.

Zulkifli said foreign funds sold for 20 consecutive weeks during the May to September period, one of the longest sustained stretch of foreign attrition since the 1997–98 Asian Financial Crisis.

He said the most unnerving period was the back-to-back trading week ended Aug 14 and 21 when the withdrawal amounted to RM1.42 billion and RM1.35 billion net respectively.

Zulkifli said that in October, foreign funds made a promising return, which coincided with the ringgit regaining some lost ground.

"However, developments at the global level were against the local bourse, and the buying in October proved to be fleeting.

"In the last trading week of 2015, foreign funds surprisingly bought a significant RM546.2 million net in the open market, reversing four successive weeks of attrition.

"That translated into a deficit of RM1.19 billion for the month of December, which could have been worse in view that it was the pivotal month during which the Fed raised interest rates for the first time in almost a decade.

"After the heavy attrition from Bursa in 2015, we estimate that the overhang of foreign liquidity for funds that had entered the local market since January 2010 to be only in the region of RM8 billion–RM9 billion," he said.

He said the fact remains that foreign shareholding on Bursa was relatively thin and is currently the lowest since the Financial Crisis.

"The downside risk as a result of foreign dumping is therefore rather limited," he said.