Market seen bucking trend amid weakness

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KUALA LUMPUR: The Malaysian equity market appeared to have bucked the trend with foreign investors’ participation rebounding to “elevated” levels last week, amid weaker regional markets and investors’ apparent aversion to equities.

In his weekly fund flow report released yesterday, MIDF Research head Zulkifli Hamzah said while prices were being battered, foreign investors had been snapping up Malaysian equities (excluding off-market deals) in the open market on Bursa Malaysia last week.

“The net amount purchased of RM134 million was relatively decent for a four-day week. Foreign investors had been selling in the preceding five consecutive weeks, offloading in total a massive RM1.68 billion net during the period,” he said.

“Foreign investors were net buyers in three out of the four trading days last week. The damage was on (last) Wednesday, when there was a global sell-off after the IMF’s growth downgrade. Still, the amount sold was small, only RM2.2 million.”

On a cumulative basis, Zulkifli said foreign investors remained net sellers of Malaysian stocks in 2014, and the net outflow as of last Friday was RM3.25 billion.

In 2013, Malaysia reported a net inflow of RM3 billion, he noted.

Zulkifli said foreign participation rebounded to “elevated” levels (more than RM1 billion) last week after being in the “moderate” bracket of RM0.75 billion to RM1 billion in the preceding two weeks.

Average daily gross purchases and sales rose to RM1.01 billion.

“Meanwhile, ‘brave’ opportunistic retail investors were busy mopping up shares at knocked-down prices. Retailers bought a strong RM178 million, the highest in a week this year.

“Retail participation (average daily gross sales and purchases) was still moderate at RM942 million, as most players stayed on the sidelines assessing the situation,” he said.

Zulkifli said local institutions were bearish, having sold RM312.3 million last week. Participation rate remained elevated at RM2.4 billion, indicating plenty of trading activity by local fund managers.

He expects a red October for the equity market, the first monthly decline in six years, and only the third time in 13 years.

“It was due to the technicals advising to stay away from the market. The FBM KLCI and FBM70 are deep below the long-term support, as represented by the 200-day moving average (DMA) line.

“We are particularly concerned about how fast the race to the bottom had been, and we do not believe that the market has settled,” he added.

Zulklifli also feels that Budget 2015 is unlikely to reverse the trend.

“Globally, risk aversion to equity is high and there was no rebound in the bellweather market on (last) Friday, after the sell-off on (last) Thursday.

“However, we expect the fundamentals of the ringgit to be strengthened with the continued improvement of the federal government’s finances,” he said.

This article first appeared in The Edge Financial Daily, on October 14, 2014.