September monthly outflow set to slow down — Bank Islam

September monthly outflow set to slow down — Bank Islam
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KUALA LUMPUR (Sept 28): September is set to be another month of foreign net outflows, albeit at a slower pace.

In a note today, Bank Islam Malaysia Bhd economist Adam Mohamed Rahim said the month of September had so far seen RM1.43 billion net of foreign net selling.

He said from last Monday to Friday, foreign funds sold RM350.7 million net of local equities on Bursa Malaysia, compared with RM558.4 million net withdrawn during the whole of the previous week.

“It was a manic start to the week for Bursa as international investors dumped RM256 million net of local equities last Monday, dragging the local bourse 0.4% to close below 1,500 points for the first time in seven trading days.

“Last Monday’s sell-off followed Wall Street’s lower close on [the previous] Friday in addition to the move of People's Bank of China (PBoC) in Beijing to leave key rates unchanged, disappointing traders looking for stimulus,” he said.

Adam said last Tuesday then saw foreign investors making their way back to Bursa at a tune of RM127.4 million net, while other Southeast Asian peers — namely Thailand, Indonesia and the Philippines — experienced foreign net outflows.

He said the FBM KLCI followed suit to gain 0.4% and close at 1,505.8 points last Tuesday, bucking the trend of other regional markets, which were in the red.

“Risk aversion captured the region as stocks followed overnight losses in US equities amid worries over coronavirus restrictions and prospects of US fiscal stimulus.

“Meanwhile, Bursa stood strong as there was buying interest in banking stocks, which are index members of the KLCI. All banking stocks in the KLCI advanced on the same day except for CIMB Group Holdings Bhd, which was unchanged,” he said.

Adam said the foreign net inflow was, however, short-lived as international funds took out RM139.1 million net of local equities last Wednesday.

He said due to political jitters caused by Datuk Seri Anwar Ibrahim’s claim that he had garnered a majority of support from Members of Parliament (MPs) to form the government, the market experienced a knee-jerk reaction to reach below 1,500 points for the second time during the week.

Adam said international investors were back in buying mode last Thursday, acquiring RM42.2 million net of local equities, with rubber glove counters being the darling of investors.

He said this occurred despite Wall Street's overnight sell-off stoked by worries about rising Covid-19 infections and lack of progress in a fiscal stimulus package by US Congress.

As such, Malaysia was the only market among its Asean peers — namely Thailand, Indonesia and the Philippines — to experience a foreign net inflow, he said.

Adam said offshore investors moved to the sidelines last Friday, selling RM125.2 million of local equities ahead of the Sabah state election on Saturday.

He said anxiety ahead of the polls somewhat outweighed news of US House Democrats’ preparation for an approximate US$2.4 trillion (RM10.01 trillion) spending package and that they may bring the bill to a vote this week.

“Nevertheless, the KLCI was steady to close 0.6% higher amid positive vibes coming from FTSE Russell’s decision to retain Malaysia in the watch list of the World Government Bond Index (WGBI).

“The month of September has so far seen RM1.43 billion net of foreign net selling.

“With three more trading days left, September is set to be another month of foreign net outflows, albeit at a slower pace than in the previous months, such as March to July which saw foreign funds dumping more than RM2 billion net each month,” he said.

Adam said in terms of participation, the average daily trading value (ADTV) of foreign investors remained robust above RM1 billion so far this month.

“On a separate development, retail investors have been net sellers of local equities every day of the week.

“In fact, they sold RM111 million net of local equities last Thursday, the highest in more than a month.

“Nevertheless, we observed that their participation was still healthy, with their ADTV hovering above the RM3 billion mark for the week,” he said.