KUALA LUMPUR: The Malaysian equity market succumbed to foreign selldown last week after resisting the bearish regional trend the week before, said MIDF Research.

In his weekly fund flow report yesterday, MIDF Research head Zulkifli Hamzah said foreign investors disposed of RM544.9 million worth of shares on the open market, but this was relatively moderate compared with an average of RM900 million sold between the second week of January and the third week of February 2014.

“Foreign investors were net sellers everyday last week. However, net outflow had not exceeded RM200m per diem. That supports the view that the bulk of foreign selling is in the past and the overhang of “hot” foreign liquidity in Malaysia has reduced significantly,” he said.

Cumulatively, foreign investors sold RM3.8 billion net of Malaysian stocks in 2014 as of last Friday, reversing the RM3 billion net inflow in 2013.

Retail investors also turned bearish after mopping up shares in the month leading to last week, as global equities took a beating. Retailers sold RM39.8 million on moderate average daily gross sales and purchases of RM961 million.

“Local institutions supported the market strongly, mopping up RM585 million. Participation rate remained elevated to RM2.6 billion, the fourth highest in a week this year,” Zulkifli said.

On the FBM KLCI, Zulkifli said the index is still in a weak territory, based on its technicals as the benchmark index staged a “death crossover” last Thursday when its short-term 50-day moving average crossed the 200-day line.

He said the benchmark index has to rebound by 3.5% to reach 1,850 points from its closing of 1,788.31 last Friday to recover within the week, while the FBM70 and the FBM Smallcap indices need to gain 4.5% and 6% respectively.

“This is too tall an order for the local market to stage in our humble opinion,” he said.

Globally, Zulkifli expects sentiment to remain brittle as investors will be wary of the US Federal Reserve’s Federal Open Market Committee meeting on Oct 29.

This article first appeared in The Edge Financial Daily, on October 21, 2014.