“Trade frictions and equity flows will continue to dominate the minds of investors as (US President Donald )Trump is bent on getting China to reform its trade policies.”
Overseas investors were net buyers following positive developments locally and overseas
ADAM MOHAMED RAHIM, MIDF Amanah Investment Bank analyst
THE recent inflow of foreign funds into the capital market may be interrupted in the coming weeks by concerns over the trade friction between the United States and China, says an analyst.
MIDF Amanah Investment Bank Analyst Adam Mohamed Rahim said foreign funds were net buyers as of Thursday, pumping in RM331.9 million against a net outflow of almost RM500 million last week, on the back of positive developments locally and overseas.
“Tuesday’s inflow of RM343.5 million was not only partly due to month-end window-dressing but also coincided with the visit of China’s Foreign Minister Wang Yi to Malaysia, which will pave the way for better bilateral ties between both countries,” he said.
Adam said the net inflow trend continued on Wednesday at RM151.3 million, following news that trade talks between Washington and Beijing would restart and coupled with Wall Street’s recovery, sparked buying interest.
However, he said US President Donald Trump’s threat to increase tariffs to 25 per cent on US$200 billion of Chinese imports, from the current
10 per cent, hampered sentiment on the Malaysian bourse which saw a net outflow of RM123.7 million on Thursday and dragged the FTSE Bursa Malaysia KLCI (FBM KLCI) 0.57 per cent lower.
“Trade frictions and equity flows will continue to dominate the minds of investors as Trump is bent on getting China to reform its trade policies,” he said.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said from a technical standpoint, the FBM KLCI had been overbought. “Therefore, further upside is quite limited in the immediate-term,” he said, adding that foreign funds could shift focus to developed countries after the Bank of England raised their policy rate by 25 basis points to 0.75 per cent and the European Central Bank indicated plans to stop the Asset Purchases Programme by yearend, paving the way for the eventual rise in itspolicy rates.
“There could be a shift in foreign funds to developed countries intermittently which will have animpact on capital flows and the ringgit,” he added.
Meanwhile, Putra Business School’s senior lecturer and manager of Business Development Dr Ahmed Razman Abdul Latiff said the cumulative year-to-date outflow recorded by Malaysia was approaching the RM9 billion mark.
He added that sentiment was still volatile depending on the unravelling news related to the USChina tariff war and suspended tariff war between the US and European Union.
On the ringgit, Razman said the ringgit-dollar exchange remained edgy due to the US-China tensions.
He expects the ringgit to stabilise at RM4.08 this quarter and not exceed RM4.20 this year.