Local stocks slide on profit-taking pre-GE14

> Foreign investors seem to be moving to the sidelines earlier than expected, says MIDF Research

PETALING JAYA: The local bourse continued to see profit-taking activity yesterday ahead of the 14th general election (GE14) tomorrow, with the benchmark index falling as much as 20.04 points or 1.09% to an intraday low of 1,821.79 points.

However, the FBM KLCI managed to pare losses to close 13.63 points or 0.74% lower at 1,828.20 on volume of 1.92 billion shares worth RM2.1 billion. Market breadth was negative with 750 losers against 187 gainers.

MIDF Research said in its weekly funds flow report that the FBM KLCI will probably stage a relief rally on Thursday after GE14 reflected by an influx of foreign inflows, assuming the federal ruling coalition retains power. To recap, foreign inflows mopped up RM1.43 billion worth of local equities during GE13.

Global investors turned net sellers for the first time in four weeks in the pentultimate week before GE14. The net amount withdrawn by foreign investors last week totalled RM438.4 million net, the second highest weekly outflow so far this year.

As a result, the year-to-date inflow stands at RM3.02 billion net, making Malaysia the only market with inflows so far in 2018 among the four Asean markets that MIDF Research tracks.

“It seems that foreign investors are shifting to the sidelines earlier than expected before the election. Tracing back to the penultimate week before GE13, foreign investors snapped up RM750.4 million net of local equities. Foreign attrition was only seen on the last trading day before GE13, which only amounted to RM91.7 million net,” said MIDF Research.

It said last Monday’s heavy of inflow of RM249.1 million net was offset by three straight days of outflows after the Labour Day break with Wednesday recording the highest daily outflow since early February 2018, totalling RM291.7 million net.

“We reckon that risk-on sentiment was hampered during this period due to GE14 fever; US-China trade talks and the Fed’s acknowledgement of inflation nearing its target without any hints to steer away from gradually tightening its policy.”

Foreign participation remained solid as the average daily trade value (ADTV) reached RM1.29 billion, the highest in seven weeks.

Local institutional funds took the opportunity to buy stocks, which resulted in the second highest weekly net buying so far in 2018 of RM605.4 million with the local institutional ADTV reaching RM2.32 billion, a fairly healthy level.