‘FOREIGN FUNDS INFLOW TO IMPROVE IN COMING WEEKS’
Malaysia’s consistent current account surplus boosting sentiment, says analyst
FOREIGN funds inflow is expected to further improve in the upcoming weeks following the RM123.3 million inflow on Thursday, the highest inflow since November 8.
Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said the big inflow also helped to pare down the week’s net foreign outflow to RM181.1 million as of Thursday.
This could be an indication that foreign funds were looking at Malaysia more positively, he said, adding that the country’s consistent current account surplus aided the strong sentiment.
“They realise that Malaysia is one of the few emerging markets that has consistently recorded a current account surplus. In the last 20 years, we have not recorded any current account deficit, meaning that we are living well within our means without overspending and not over-importing,” he said.
Pong said foreign investors were unaffected by the recent Tabung Haji (TH) issues.
However, he said TH’s intention to sell its stakes, especially in small cap counters, would have a big impact on the local equity market and affect the sentiment among local investors.
“Given the size of its funds, it could be even as much as RM10 billion worth of shares that will be sold in the market.”
Pong said due to the cautious internal and external sentiments, window-dressing activities would likely start later this month.
“I dare not say that any local funds-led window-dressing activities have commenced because there is no consistent evidence of a rise in the FTSE Bursa Malaysia KLCI. Instead, on days when the overall global market was weak, the index dropped.”
TH recently announced that it intended to restructure its portfolios and reduce its assets in the stock market to 20 per cent of its portfolio from about 50 per cent at present.
The pilgrims fund also said they were especially conscious of their holdings of small-cap stocks and wanted to focus on dividendyield stocks.
Going forward, Pong said the market would be closely monitoring developments on the United States-China trade war.
“The market has been reacting, on a daily basis, to any announcement relating to the trade war,” he said, adding that the outcome of the US Federal Open Market Committee meeting scheduled for tomorrow and Wednesday was being keenly awaited to gauge the US central bank’s monetary policy stand.
“If the US Federal Reserve raises rates or indicates its intention to do so, the US dollar will strengthen,” said Pong, adding that the meeting could provide some indicators on the Fed’s move for next year.
“Generally, the market expects interest rates to continue rising next year,” he added.