Foreign funds turn net sellers as outflows exceed inflows

KUALA LUMPUR: Foreign institutions turned net sellers in the FTSE Bursa Malaysia KLCI between Monday and Thursday last week, with outflows amounting to RM146.53 million against inflows of RM90.18 million in the same period previously.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said global economic uncertainties, coupled with a moderate domestic economic outlook, had triggered concerns among investors to opt for more stale markets.

“Externally, the inversion of yield curve in the United States Treasury bonds has triggered concerns on a possible recession in the US. The spread between the 10-year yield and threemonth yield has been negative since the previous Friday and the prevailing spread currently stands at one basis point.

“This means the long-term rate is lower than the short-term rate, a situation known as yield inversion and typically results in an economic recession within 12 months to 27 months,” he said.

Mohd Afzanizam said the United Kingdom’s exit from the European Union was in limbo as Prime Minister Theresa May was no longer in control of the Brexit deal and similarly, the ongoing US-China trade discussion seems to be fluid and fragile.

Meanwhile, he said Bank Negara Malaysia’s 2019 gross domestic product outlook of between 4.3 and 4.8 per cent for this year suggested that downside risks to growth were rising, while the range forecast for inflation of 0.7 to 1.7 per cent indicated the central bank had policy space available to reduce the Overnight Policy Rate this year.