KUCHING: Foreign investors turned bearish on Malaysia last week as global funds sold RM989.3 million of Malaysian stocks in the open market – the highest in five weeks – which is an increase from RM218.9 million outflow the week before.
MIDF Amanah Investment Bank Bhd’s research arm (MIDF Research) noted that foreigners sold every day, except on Tuesday. On Wednesday, the size of the pullout surged to RM399 million, the second highest this year, after the RM556 million drain on February 4.
Selling continued to be heavy on Friday, which is rather ominous for the market this week, it said.
“Although the sale amount exceeded RM300 million on two days last week, the daily outflow had been capped at below the RM400 million level this year, except for one day.
“Last year, outflow exceeded RM400 million on 10 trading days. On that score, the worst in terms of intensity of foreign sale was arguably in 2013,” said the research house.
For the year to date, foreign funds have pulled out RM6.54 billion net from Malaysian equity. Still, MIDF Research estimate an overhang of foreign liquidity amounting to RM27.4 billion, for cumulative money flow since January 2010.
“We note that in terms of participation rate, foreign involvement surged to above the RM1 billion mark for the first time in five weeks. Average daily foreign participation rate rose to RM1128 million from RM933 million the week before,” it added.
Brave retail investors nibbled in the market last week and bought RM79 million net on moderate participation of RM752 million. The market was however, heavily supported by local fund, mopping up RM910 million, on active RM2.26 billion participation.
Halfway through March, prospects did not appear to be as bright as before, MIDF Research said. The confluence of events has heightened the market risks this week.
To add to the uncertainty, the research firm noted that technicals have worsened. After holding up at the 50 day moving average (50DMA), the KLCI lost that support level last week and appears to be racing towards the 200DMA, which is at 1,793 points.
“We expect the 1,800 support level to be surrendered this week as we doubt that the ‘invisible hands’ would want to interfere when sentiment is rather fragile.”
Similarly, the FBM70 also ‘made a swift reversal’ last week after what appeared to be a promising comeback.
The research house noted it fell below the 50DMA last week, and this will cause the divergence between the 50DMA and 200DMA to widen, which is not good as the former is former is lower than the latter.
Despite positive macroeconomic evidences for Malaysia of late, there is too much uncertainty for the market to digest this week.
Recall that emerging market risks were played out to significant damage in during the December-January period. Since then, some of these markets, have rebounded strongly.
The equity markets in Indonesia, Philippines, Thailand and India are now leading in terms of the performance this year.
Indonesia and India appear to have shrugged off the ‘Fragile 5’ label, and are clearly benefiting from an impending general election, initially seen as a risk to be avoided. Thailand is rising from the ashes of its political conflicts.
Philippines is a darling market as the economy is registering strong growth, matching that of China.
“Will there be a playback of emerging market risks? Perhaps, but the pattern of liquidity flow suggests that faith is unshaken with regard to emerging markets in this part of the world. On that score, we see any significant retracement as an opportunity to accumulate,” the research house highlighted.