This article first appeared in The Edge Financial Daily, on November 24, 2015.

KUALA LUMPUR: Foreign investors sold RM320.1 million net of purchases in the open market last week, after offloading RM714 million in the preceding week, according to MIDF Research.

In his weekly fund flow report yesterday, MIDF Research head Zulkifli Hamzah said foreign trade in the aftermath of Paris was ominous as expected.

He said yesterday, foreign funds sold RM219.1 million, the 52nd day this year that the deficit exceeded RM200 million.

“The selling cannot be entirely attributable to Paris as sentiment leading up to the tragedy was already fragile and foreign funds were already in a selling mood.

“In the Friday prior (Nov 6), foreign funds had offloaded a whopping RM322 million,” he said.

Zulkifli said foreign selling continued last Tuesday and Wednesday, but at a much slower pace.

He said by last Thursday some foreign investors were back nibbling in the market, but the selling resumed last Friday, albeit only RM92 million.

He explained that for 2015, last week’s attrition increased the cumulative net foreign outflow to RM18.5 billion, compared with the RM6.9 billion outflow for the entire 2014.

“We estimate the overhang of foreign liquidity for money that came in since early 2010 to be less than RM10 billion, at only RM9.4 billion.

“In other words, foreign presence in the local equity market is currently very low,” he said.

Zulkifli noted that MIDF Research had warned a few weeks ago that the market was entering a period of low activity, which is a common phenomenon in November and December.

“Last week, foreign participation [average daily gross volume] dropped to RM823 million, and remained below the RM1 billion mark for the fourth consecutive week.

“Local institutions supported the market passively buying RM322 million. However, participation rate dropped to RM2.16 billion, the lowest in seven weeks,” he said.

Zulkifli said he detected edginess in the retail market as there was profit-taking in some small-cap stocks.

“However, buying support was present and that made the retail market rather vibrant.

“Retailers were only marginal sellers last week at RM1.9 million. However, participation rate surged to RM955 million, the second highest in 2015!” he said.

Commenting on the regional markets, Zulkifli said the global equity market demonstrated its resilience in the aftermath of the Paris tragedy.

He said the bellweather Wall Street, the Dow Jones and S&P 500 actually rallied yesterday in the aftermath of the tragedy, rising 1.4% and 1.0% respectively.

“For the S&P 500, last week’s gain of 3.3% was the best in 2015.

“In Europe, Germany’s DAX and UK’s FTSE gained more than 3% last week. Even France’s CAC index rose 2.1%,” he added.

“Nevertheless, global funds were still selling Asian equities last week, but the amount eased significantly from that the week before,” he said.