KUCHING: In a reversal of position, foreign investors bought back Malaysian stocks last week after selling for the first time in three months the week before.
MIDF Amanah Investment Bank Bhd’s research division (MIDF Research) noted that investors classified as ‘foreign’ turned net purchasers on Bursa’s open market last week, mopping up RM355.8 million net – the highest in seven weeks – despite trading days shortened by the holiday on Tuesday.
“The amount could have been higher if not for the deficit on Friday. Foreigners sold RM113.9 million on Friday as sentiment was adversely affected by MH17. Before that foreign investors were net buyers for three consecutive days,” said analysts.
On a cumulative basis, foreign investors remained net sellers of Malaysian stocks in 2014, but the net outflow as of last Friday had declined to RM1.46 billion.
Foreign participation increased slightly but remained moderate. The average daily foreign gross purchase and sale on Bursa rose to RM955 million but was still below the RM1 billion threshold.
“We believe the retail market is making a comeback although retail investors offloaded RM76 million last week. Participation rate increased to RM1 billion, the highest in 12 weeks, and retailers were net buyers on Friday.
“Local institutions supported the market on Friday, but it was not aggressive. Indeed, for the week, local funds offloaded RM279.4 million net. Participation rate remained elevated for the fourth week running at RM2.52 billion,” it added.
As expected, the MH17 tragedy, on the heels of MH370, triggered a negative reaction on the local bourse.
The FBM KLCI fell below the short-term support as represented by the 50-day moving average (50DMA) line.
At 1872.97, the index is 0.3 per cent below the last support point of 1878.23.
Without local institutional support in the next few weeks, the index may gravitate towards
its longterm support, as represented by the 200-DMA of 1,837 points.
However, the research house do not expect this to happen as Friday’s reaction was probably knee-jerk in nature.
“We note that regional peer markets remained on the upward trajectory on Friday. Geopolitical risks may have risen, but the fundamentals of the local market remain intact.
“The FBM70 and FBM Smallcap indices also retreated on Friday, but these are still trading comfortably above their respective support levels.
“The economic calendar is rather light this week, except for US inflation numbers on Tuesday and China’s flash PMI on Thursday. Focus is expected to remain on geopolitics,” said MIDF Research.
Consensus opinion appears to be that BNM’s Monetary Policy Committee (MPC) will refrain from raising the Overnight Policy Rate (OPR) when it meets on September 18. Thereafter, it will meet on November 6, the last meeting of the year.
However, the jury is still out on the matter.
The interbank rate continued to climb last week after the OPR hike.
The three-month KLIBOR is now at 3.59 per cent, the highest since 2008. If the KLIBOR continueS its uptrend, MIDF Research said it would not be surprised if the OPR were to hit 3.5 per cent by the end of the year.