EXTERNAL FACTORS LIKELY TO AFFECT REGION MARTS

External uncertainties to continue affecting trading as fund managers stay on sidelines, say analysts

THE extent of the trade war and how it may evolve further will certainly be the focal point to plague regional equity markets, including Malaysia, as fund managers remain on the sidelines and adopt a wait-and-see approach.

Generally speaking, the Malaysian equity markets are still marred by external uncertainties, says Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid.

He said the United States economy continued to exhibit a healthy trend with the recent second-quarter gross domestic product growth being revised upwards to 4.2 per cent, from the earlier estimate of 4.1 per cent.

Mohd Afzanizam said at this rate, the US economy was growing fast with inflationary pressures rising, premised on inflation hovering at 2.9 per cent in the past two months.

“Obviously, the prevailing inflation rate is above the US Federal Reserve’s (Fed) two per cent target, which implies that the US central bank is on track to raise its federal fund rate at the meeting this month.

“On one hand, we have a situation where we have a higher interest rate environment in advanced countries and on the other, anxiety over policy direction domestically.

“This could explain why the net foreign fund flow trend was uneven although intermittently we saw net inflows,” he said.

Overall, Monday to Wednesday of the week just-ended saw total foreign net attrition of RM63.6 million, which offset the foreign net inflow of RM46.5 million recorded in the week ended August 24, said Malaysian Industrial Development Finance Bhd research analyst Adam Mohamed Rahim.

“However, investors fled Malaysian stocks with a large net outflow of RM121.6 million as they took the opportunity to cash in gains ahead of the long weekend.

“This was also in conformity with other markets, namely Thailand and Indonesia.

“There were no fresh catalysts as investors were still waiting for direction from latest trade negotiations between the US and Mexico,” he said.

Meanwhile, on a year-to-date basis as of Wednesday, the total foreign net outflow from Malaysia stood at RM8.6 billion, or US$2.2 billion, the second lowest outflow (behind the Philippines ) among the four Asean markets tracked, Adam added.