Foreign fund outflow slowed to RM212m this week

KUALA LUMPUR, May 3 — Foreign investors were net sellers in the local equity market during the shortened trading week, but total net outflow narrowed to RM212 million in the April 27-29 period compared with RM689.95 million for April 20-22.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the lower foreign fund outflow was supported by the focus on the government’s re-opening of the economy amid lacklustre economic data. 

“Prime Minister Tan Sri Muhyiddin Yassin indicated during his address on Labour Day that there will be a re-opening of economic sectors going forward.

“As such, the output loss should gradually dissipate when economic activities return to normalcy,” he told Bernama.  

During April 27-29, the average participation rates for foreign and local institutions stood at 18.05 per cent and 44.21 per cent, respectively, while average local retail participation was 37.75 per cent.  

Local institutions recorded RM36.22 million worth of net buying during April 27-29,  compared with a net buying of RM279.17 million a week earlier. 

Meanwhile, on the fund flows for the local retail investors, he said there was a net buying of RM175.78 million in the first three days of this week compared with a net buying of RM410.59 million during the April 20-22 period.

The FTSE Bursa Malaysia KLCI (FBM KLCI) closed at 1,407.8 points on Thursday, higher by 37.9 points compared with the 1,369.9 points recorded at the end of trading the previous Friday (April 24). (Markets were closed on Friday this week for Labour Day.) 

On the external front, Mohd Afzanizam said data on the US first quarter (Q1) 2020 gross domestic product (GDP) came in worse than expected, showing the economy shrank by 4.8 per cent. The US ISM Manufacturing Index fell to 41.5 in April (March: 49.1), with the New Orders sub index plunging to 27.1 (March: 42.2). 

On April 29, the US Federal Open Market Committee issued a statement reassuring the markets that it would continue to support the economy until such time that recovery had become convincingly visible. 

Meanwhile, for next week, Mohd Afzanizam said the markets would be watching the decision of Bank Negara Malaysia’s Monetary Policy Committee on the Overnight Policy Rate. 

“We believe most economists are expecting reduction in the policy rate by between 25 and 50 basis points in the upcoming meeting.

“There is also data on China’s exports for April (coming up). This could shed more lights on the extent of the economic recovery in China after exports fell at a slower rate of 6.6 per cent year-on-year in March from -17.6 per cent in the preceding month,” he said. 

Crude oil prices were higher in the past week and recent data such as a decline in the US crude oil production to 12.1 million barrels per day (mbpd) for the week ending April 24 from 13 mbpd at the end of March have been supportive of the market. 

“As such, the FBM KLCI is likely to hover around 1,400 points next week as investors await more evidence of further improvements in the state of the global economy,” Mohd Afzanizam added. 

Meanwhile, AxiCorp chief global market strategist Stephen Innes said the FTSE KLCI put in a reliable comeback performance by rising two per cent the past week, and the ringgit surged 1.3 per cent due to rising oil prices and a broadly weaker US dollar across the board.

However, he cautioned that it was not all a bed of roses, as trade war clouds again loomed ominously on the horizon as the hawks in the US administration put China in the cross hairs, accusing a Wuhan lab of spreading Covid-19 while threatening trade retaliation.

“The current market is factoring in the less globalised world during the initial phase of the post-pandemic recovery as economies internalise, but rekindling a dormant US-China trade war will have negative consequences for Asian exporters, including Malaysia,” said Innes. 

Over the short term, he said, oil prices would be the key, which could help see fund inflows if prices continued to rise.

“But investors could turn more cautious if the trade war drums start to beat again,” Innes warned. — Bernama