The Sun (Malaysia)
Foreign funds net sellers last week with RM600m
PETALING JAYA: Foreign investors turned net sellers after three consecutive weeks of buying, offloading RM600.1 million in equities after mopping up RM1.43 billion in the preceding three weeks, according to MIDF Research.
It believes Bursa is likely to be under the radar in the weeks ahead as foreign liquidity in the system is still very low.
“Even after the selling last week, we expect further attrition of the residual RM622 million of foreign funds that bought into local stocks in October,” it said in a research note yesterday.
However, MIDF Research said there should be ample local liquidity to absorb any withdrawal.
The research house said it was not an outright deficit week though as overseas investors were still accumulating local equities last Monday, buying RM123.1 million on the day.
“It was obviously a carry-forward momentum from the preceding Friday when a huge RM296.5 million inflow was recorded,” it said.
The turnaround was on Tuesday and the real damage was on Thursday, in the aftermath of the US Fed’s hawkish declaration of intent.
“Foreign selling on the day surged to RM359.7 million, the 12th highest in a day this year. On Friday, the selling tapered to RM191.5 million,” it said.
MIDF Research stressed that last week’s attrition has raised the cumulative net foreign outflow to RM17.5 billion year-to-date, compared with the RM6.9 billion outflow for the entire 2014.
“However, the October month recorded a relatively rare incidence of foreign buying this year amounting to RM622.2 million, the first surplus since April and only the second time in the last 14 months,” it said.
The research house cautioned that the local bourse is entering a period of low market activity, evidenced by a significant drop in foreign participation last week.
Average daily gross volume fell to RM916 million, the first time it dipped below the RM1 billion mark in seven weeks.
Local institutions bought RM503.7 million on a yet active RM2.35 billion participation rate.
The retail market, meanwhile, was vibrant in October, but it is likely to take a breather in line with the broader market. Participation rate fell below RM800 million for the first time in four weeks at RM758 million.
“Retail investors bought RM96.4 million net last week, but these are either late in the game or have the wherewithal to hold,” it added.
After a strong month of October, MIDF Research expects a subdued month ahead.
“After all, history is not exactly on the side of the penultimate month of the year. Both the KLCI and FBM70 ended in the red zone in November, in four out of the last five years,” it said, adding that the FBM KLCI and the FBM70 fell 1.8% and 3.9% respectively last year.
“We would especially caution against taking excessive positions in small cap stocks. The FBM Smallcap index fell a whopping -7.1% in November last year, and had declined during the same month in the last six successive years,” it added.