BURSA OUTFLOW AT RM252.98M
Foreign investors offloading shares over uncertainties, says analyst
FOREIGN fund outflow on Bursa Malaysia dissipated in the holidayshortened week of last Tuesday and Thursday to RM252.98 million compared with RM1 billion in the previous week.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said foreign investors were offloading equities in view of heightened uncertainties.
“We believe this period of heightened uncertainties will continue until the Group of 20 summit next month. Economic
data has been soft, judging from recent Purchasing Managers’ Index (PMI) indices.”
This month’s PMI for manufacturing in the eurozone is 47.7 points, suggesting that manufacturers’ sentiment is generally pessimistic.
This could have an impact on hiring decisions and capital expenditure, said Afzanizam.
Similarly in the United States, the PMI fell to 50.6 points this month from 52.6 points previously, while Japan’s PMI slid to 49.6 points from 50.2 in April.
“Businesses in the advanced world are very cautious now. Therefore, it is a riskoff mode and typically, investors would seek safe-haven instruments, such as bonds, and safe-haven currencies, such as the US dollar, yen, euro and Swiss franc.”
Meanwhile, local institutions remained net buyers with RM230.67 million worth of purchases on Tuesday and Thursday.
On the escalating trade tensions between the United States and China, Afzanizam said the impact on the global supply chain in the technology sector could be quite severe.
“Of course, there is talk that trade diversion would happen and benefit other Asian countries. However, the transition to a new supplier could take a while. So, we think the trade diversion story is for the medium to long term.
According to the International Data Corp, sales of global smartphones declined by 6.6 per cent in the first quarter of this year.
“In that sense, the technology sector is already on a declining trend in terms of sales. With or without the trade war, the technology sector appears to be softening,” said Afzanizam.
On another note, oil prices tumbled on rising demand risks. The benchmark Brent crude was trading lower at US$68.69 (RM287) per barrel on Friday from US$73.08 per barrel last Monday.
FXTM market analyst Han Tan said the deterioration in US-China ties brings next month’s Organisation of the Petroleum Exporting Countries meeting into sharper focus.
“Ultimately, the US-China standoff is expected to dent global oil demand and complicate attempts by oil producers to rebalance the global oil market. Further bouts of volatility should not come as a surprise to traders.”