“The focus on improving corporate governance is a big plus and will entice foreign investors.”

Outflows conform with regional peers such as S. Korea and Taiwan, says MIDF Research

ADAM MOHAMED RAHIM, Malaysian Industrial Development Finance Bhd Research analyst

THE markets and investors were jolted last week by major announcements, including that on the Tun Razak Exchange (TRX) project as well as talk of a new Bank Negara Malaysia governor.

The stock market and ringgit have yet to pull out from the volatility caused by the revelation of the country’s debts and state of the economy.

However, a financial analyst said Malaysians should not be worried of the heavy foreign selling as it conformed with other Asian peers.

Malaysian Industrial Development Finance Bhd (MIDF) research analyst Adam Mohamed Rahim said South Korea and Taiwan saw higher net outflows of US$418 million (RM1.67 billion) and US$1.27 billion, respectively, during the first four days of last week, compared with Malaysia’s US$360.2 million.

“Outflows may feature in the near term, but bear in mind that the main trigger was external developments, such as geopolitics in the Korean peninsula and the trade tension between the United States and China,” he said.

He said foreign selling of Malaysian equities was higher than the previous week’s RM1.21 billion and reaching RM555 million net on June 19, the highest daily outflow since May 30.

Despite of the gradual decline in attrition, Adam said the market barometer FTSE Bursa Malaysia KLCl moved in the opposite direction to slide to 1,692 points on Thursday, the lowest close since February last year.

It marked the ninth straight day of losses, with Telekom Malaysia Bhd leading decliners and dropping as much as 12 per cent amid worries over a slash in broadband prices.

“However, in terms of investors’ participation from Monday to Thursday, foreign funds remained active as the foreign average daily trade value stood above the RM1 billion mark at RM1.55 billion.”

Adam said the outflows might feature in the short-to-medium term, considering concerns over US recession, coupled with lofty valuations of developed markets and their hawkish and protectionist stances.

“And, of course, there are uncertainties on the domestic front, as the new government settles down and works through its plan.

“Changes cannot happen overnight, especially ones that involve existing laws,” he said.

Commenting on the TRX project, Adam said it negatively impacted the construction sector, but should not derail interest among foreign investors.

“The focus on improving corporate governance is actually a big plus and will entice foreign investors,” he said.

Outflows may feature in the near term, but bear in mind that the main trigger was external developments. ADAM MOHAMED RAHIM Malaysian Industrial Development Finance Bhd research analyst