YTD outflow at level not seen since 2015, says Bank Islam

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KUALA LUMPUR (Sept 21): The year-to-date (YTD) disposal of Malaysian equities on Bursa Malaysia is at a level of outflows not seen since 2015.

So far this year, foreign funds have taken out RM21.41 billion net of local equities, exceeding the RM19.49 billion foreign net outflow in 2015, said Bank Islam Malaysia Bhd.

In a note today, Bank Islam economist Adam Mohamed Rahim said foreign funds disposed of RM558.4 million net of local equities on Bursa last week, compared to RM71.2 million net acquired in the week before.

Adam said international investors began the week by withdrawing RM187.9 million net of local equities last Monday.

However, he said the local bourse was up by 0.4%, supported by net buying activity of retail investors who scooped up RM280.3 million of local equities as they weighed the prospect of a Covid-19 vaccine.

“AstraZeneca disclosed it had resumed British clinical trials of its Covid-19 vaccine, suspended after a test patient fell ill.

“Meanwhile, China's state news outlets reported that 'hundreds of thousands' of mainland residents were given an effective Covid-19 vaccine, without [getting] related adverse effects,” he said.

Adam said foreign net selling activity inched higher to RM223 million last Tuesday, ahead of the Malaysia Day public holiday.

He said this occurred even after Beijing released its August industrial output and retail sales figures, which rose 5.6% and 0.5% from a year earlier respectively, confirming that an economic recovery was under way.

“Notwithstanding this,  retail investors and local institutions mopped up RM153.6 million and RM69.3 million respectively last Tuesday, pushing the FBM KLCI 1.3% higher to 1,531.3 points, the highest close in more than two weeks.

“Buying interest was probably focused on the banking sector as the sector was seen to be more stable in the long run, especially when the full-fledged moratorium will only be on a targeted basis starting from Oct 1.

“As such, it was no surprise that the Bursa Malaysia Finance Index increased by 2.1%, the largest gainer among the sectors,” he said.

Adam said as Bursa reopened last Thursday, foreign net selling slowed down to RM84.6 million net.

He said Bursa’s foreign net outflow last Thursday was in conformity with other regional peers, namely South Korea, Taiwan, Thailand, Indonesia and the Philippines, after the US Federal Reserve (Fed) said it would keep interest rates low in the coming years but failed to come up with further stimulus measures.

“On the corporate front, Top Glove Corp Bhd’s best-ever quarterly net profit of RM1.29 billion for 4QFY20 (the fourth quarter ended Aug 31, 2020) spurred some profit-taking activity, which caused its share price to drop by 7.6%.

“The KLCI followed suit to close 1.2% lower at 1,513.1 points last Thursday,” he said.

Adam said the momentum of foreign net selling further decelerated to RM63 million last Friday, tracking positive data from the US labour market which showed jobless claims drop by 33,000 to 860,000 in the preceding week.

“Apart from that, the movement of crude palm oil futures, which went above RM3,000 per tonne last Friday, was another catalyst for foreign investors to reduce their selling activity.

“In comparison with Asian peers, namely South Korea, Taiwan ,Thailand, Indonesia and the Philippines, Malaysia has the third smallest foreign net outflow on a YTD basis. South Korea and Taiwan have the largest YTD foreign net outflow of more than US$20 billion (RM82.24 billion) each,” he said.