Malaysian equities succumb to foreign selldown after resisting regional weakness

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KUALA LUMPUR (Oct 20): The Malaysian equity market succumbed to foreign selldown last week after resisting the bearish regional trend the week before, said MIDF Amanah Investment Bank Bhd.

MIDF Research Head Zulkifli Hamzah said foreign investors disposed of RM544.9 million worth of shares in the open market, but noted that it was relatively moderate compared to an average of RM900 million sold between the second week of January until the third week of February 2014.

“Foreign investors were net sellers every day 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 in his weekly fund report.

Cumulatively, Zulkifli said foreign investors sold RM3.8 billion net of Malaysian stocks in 2014 as of last Friday, which reversed the RM3.0 billion net inflow in 2013.

Meanwhile, retail investors had 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 RM585m. Participation rate remained elevated at RM2.6 billion, the fourth highest in a week this year,” he 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, and said that investors would be wary of the US Federal Reserve’s Federal Open Market Committee meeting on Oct 29, 2014.