KUALA LUMPUR: Foreign investors sold RM594 million of local equity on the open market last week, the third highest in a week this year, according to MIDF Research. 

In his weekly fund flow report yesterday, MIDF Research head Zulkifli Hamzah said foreign investors dumped Malaysia-listed equities last week, just as hope was rising that net purchases observed in the week following Chinese New Year could be sustainable.

He said there was follow-through foreign buying last Monday, after the big purchase recorded on the preceding Friday. 

“However, sentiment reversed thereafter and foreign investors turned net sellers for the rest of the week. 

“The selldown was particularly heavy last Thursday and Friday as the amount rose to RM269 million and RM244 million respectively,” he said. 

Zulkifli noted that so far this year, there have been eight trading days during which net foreign sale exceeded RM200 million. In 2014, the corresponding number was 23 days.

Zulkifli said last week’s sale increased the cumulative net foreign outflow for 2015 to RM3.41 billion. He said the cumulative foreign outflow for the entire 2014 was RM6.93 billion.

“Foreign participation rate (daily average gross purchase and sale) surged to RM1.29 billion, the highest this year. Daily foreign participation has exceeded RM1 billion nine days in a row now.

“Local institutions supported the market last week, mopping up RM544 million, on a participation rate of RM2.32 billion,” he said. 

Zulkifli said local institutions had absorbed RM3.72 billion net so far this year. In 2014, they bought RM8.18 billion net.

Zulkifli said retailers remained on the sidelines. 

“Although retailers bought RM49.5 million net, the first time in seven weeks, trading activity was still relatively insignificant at RM799 million, identical to that the week before. 

“Expect more opportunistic retail buying this week if the market comes under severe selling pressure,” he said. 

Meanwhile, Zulkifli said the ringgit is expected to define the market this week. 

“It slid to 3.65 on (last) Friday, and the prospect does not look good in this immediate term after the latest US employment numbers,” he said. 

Commenting on the region, Zulkifli said the performances of equity markets around the world remained mixed last week. 

He said China announced it is targeting a growth rate of around 7% in 2015, the lowest target since 2004, which set the tone for markets in Asia last week. 

He added that the Hang Seng and China CSI indices were the worst hit, falling by more than 2.6%. 

“However, Friday’s release of the employment report in the US could be a game changer in this short term. The unemployment rate fell from 5.7% to only 5.5%, the lowest since May 2008. It is now at a level that the [US Federal Reserve] is comfortable to raise interest rates.

“These two developments are likely to partly downplay, at least in the short term, the positive effect of the European Central Bank’s [ECB] quantitative easing. 

“From March 9, the ECB will be pumping €60 billion (RM242.88 billion) into the market per month, until September 2016. A significant amount of this liquidity is expected to find its way to Asia,” he said.

This article first appeared in The Edge Financial Daily, on March 10, 2015.