Fund outflow slows to RM212m on news of economy reopening

KUALA LUMPUR: Foreign investors were net sellers in the local equity market during last week’s shortened trading week but total net outflow narrowed to RM212 million from last Monday to Thursday compared with RM689.95 million on April 20-22.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the lower outflow was supported by the focus on the government’s reopening of the economy amid lacklustre economic data.

“As such, the output loss should gradually dissipate when economic activities return to normalcy,” he added.

The average participation rates for foreign and local institutions from last Monday to Thursday stood at 18.05 and 44.21 per cent, respectively, while the average local retail participation was 37.75 per cent.

Local institutions bought RM36.22 million worth of equities last week compared with RM279.17 million a week earlier.

On the external front, Afzanizam said the United States’ first-quarter gross domestic product data came in worse than expected, showing the economy shrank by 4.8 per cent.

The US ISM manufacturing index fell to 41.5 last month (March: 49.1) and the New Orders sub index plunged to 27.1 (March: 42.2).

Afzanizam said the markets would now be watching the decision by Bank Negara Malaysia on the Overnight Policy Rate.

“We believe most economists are expecting a reduction of between 25 and 50 basis points.

“There is also the upcoming data on China’s exports for last month. This could shed more light on the extent of the economic recovery in China after exports fell at a slower rate of 6.6 per cent year-on-year in March from -17.6 per cent in the preceding month,” he said.

Crude oil prices were higher in the past week and recent data, such as the decline in the US crude oil production, had been supportive of the market.

“As such, the FTSE Bursa Malaysia KLCI (FBM KLCI) is likely to hover around 1,400 points this week as investors await more evidence of further improvements in the global economy,” added Afzanizam.

AxiCorp chief global market strategist Stephen Innes said the FBM KLCI made a reliable comeback by rising two per cent last week, while the ringgit surged 1.3 per cent due to rising oil prices and a broadly weaker US dollar.

However, he cautioned that the US-China trade war clouds loomed on the horizon.

“The current market is factoring in a less globalised world during the initial phase of the postCovid-19 pandemic recovery as economies internalise, but the rekindling of a ‘dormant’ USChina trade war will have negative consequences for Asian exporters, including Malaysia.”

Over the short term, he said oil prices would be the key to fund inflow movements.

“But investors could turn more cautious if the trade war drums start to beat again,” said Innes.