Net foreign selling continues for third consecutive week

Malaysia continued to experience net foreign selling for the third consecutive week. — Picture by Hari Anggara
Malaysia continued to experience net foreign selling for the third consecutive week. — Picture by Hari Anggara

KUALA LUMPUR, April 14 — Malaysia continued to experience net foreign selling for the third consecutive week as investors shifted their asset allocation into safe havens such as bonds and money market.

This was due to the bearish scenario in the global market which has a far more significant impact than internal factors.

Bank Islam Malaysia chief economist Mohd Afzanizam Abdul Rashid said in fact, net selling during the first four days of this week (April 8-11) amounted to RM162.8 million, a decline from RM291.9 million in the same period last week.

“Retail investors are the main buyers in Bursa Malaysia at RM110.1 million during April 8-11, a rebound from RM11.3 million worth of sales from April 1-4.

“The local institutions’ participation in the local stocks stood at RM52.8 million between April 8 and April 11 compared with RM303.2 million between April 1 and April 4,” he told Bernama.

He said outflows may feature in the near term but the main trigger would be external developments such as the terrible outcome of Brexit, the dovish stance among the major central bankers, as well as the recent downward revision in global growth by the International Monetary Fund (IMF).

“Naturally, during such period, investors would be very defensive, leading to higher demand for safe haven securities such as fixed income instrument,” he said.

Recently, IMF managing director Christine Lagarde said the six-month delay of Britain’s exit from the European Union avoids the “terrible outcome” of a “no-deal” Brexit that would further pressure a slowing global economy but does nothing to lift uncertainty over the final outcome.

Brexit is just one of a clutch of economic risks that prompted the IMF this week to cut its global growth forecast for 2019 to 3.3 per cent, the lowest rate since 2016, with a slight rebound to 3.6 per cent expected next year.

Meanwhile, Phillip Capital Management senior vice president (investment) Datuk Nazri Khan Adam Khan said the drop in the net selling value on a week-to-week basis was underpinned by local factors including better commodity prices, ringgit stabilisation and the expectation of better gross domestic product for the second quarter of this year.

He told Bernama that on a year-to-date basis, foreign funds had sold RM1.8 billion net of local equities.

“Looking at the effect on Bursa Malaysia which will likely to see a technical rebound next week, it is expected that there will be a net foreign funds buying of five per cent, driven by rising commodity prices as well as the unchanged interest rate,” he said.

As for the ringgit movement for the week under review (April 8-11), the disappointing Industrial Production Index data for February 2019, which grew only 1.7 per cent year-on-year, coupled with the downward revision of the global growth forecast by IMF, had dragged the ringgit to hit a 10-week low of 4.1120 against the US dollar.

However, a financial analyst who requested anonymity said the news on the resumption of the East Coast Rail Link (ECRL) announced by the Prime Minister’s Office would provide impetus to the ringgit.

On Friday, it was reported that the ECRL project would resume at a reduced cost of RM44 billion compared with RM65.5 billion previously, following the signing of a supplementary agreement between Malaysia Rail Link Sdn Bhd and China Communications Construction Company Ltd.

Further details of the supplementary agreement will be announced by Prime Minister Tun Dr Mahathir Mohamad on April 15.

Elsewhere, on the corporate front, the Ministry of Economic Affairs had tabled its White Paper in Parliament on Wednesday on the ailing Federal Land Development Authority (Felda) and revealed that the government will allocate RM6.23 billion to rescue Felda via grants, loans and government guarantee.

Among other highlights, Felda and Felda Investment Corp’s (FIC) management also broke laws by making several decisions on purchases without the approval from the directors’ board, or in direct contradiction with the decisions made by the directors’ board or investment committee.

The White Paper also revealed that Felda was expected to delay its RM1.98 billion debt repayment this year, with another RM9.3 billion to be paid periodically in eight years, between 2020 and 2028.

Meanwhile, Tenaga Nasional Bhd’s shares dropped 52 sen to RM12.06 at Thursday’s close after Khazanah Nasional Bhd had reportedly sold 85 million shares of the utility company at RM12.33 apiece. The sale wiped out RM2.5 billion from the utility giant’s market capitalisation, reducing its size to RM69.03 billion.

Amid the sell-off, Khazanah remained as the largest shareholder by a wide margin in Tenaga.

Due to a fire and explosion that occurred at the Pengerang Integrated Complex in Johor, both shares of Petronas Chemicals Group Bhd and Dialog Group Bhd fell on Friday.

According to a statement by Petronas, the incident took place at 1.25 am whereby an emergency and fire response team was deployed and contained the fire within 30 minutes.

The Pengerang Deepwater Terminal is developed and partly-owned by Dialog. — Bernama