KUCHING: Apprehensions over higher risk in emerging markets drove foreign funds to exit Bursa Malaysia for the week ended September 25.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) yesterday said emerging markets were routed over the double blow of China and Brazil.
In China, MIDF Research said advance numbers suggested that the manufacturing sector is deteriorating disconcertingly.
The Chinese preliminary purchasing managers index (PMI) fell to 47 points in September, the lowest in six and a half years.
The official PMI fell below 50 points for the first time in six months last August.
Additionally, MIDF Research observed the Brazillian economy which could perform worst than expected this year after the Brazil’s central bank revised downward its 2015 forecasts last Thursday has caused the risk premium on emerging markets to rise to the highest level since the 2008 Financial Crisis.
Brazil’s currency, real, has lost more than 35 per cent against the US dollar this year.
On top of that, efforts by the Brazil’s government to sell currency swaps and dollars with repurhase agreements through extraordinary auctions last week did little to support the currency.
As a result, MIDF Research believed foreign investors dumped emerging south east equity on worries that the Brazilian situation will lead to a currency depression.
It observed selling by foreign funds was aggressive across all financial markets.
The hardest hit were the more developed North Asian markets of Taiwan and South Korea where their money outflow almost doubled compared to Southeast Asia.
In particular, the Taiwan bourse saw foreign investors selling US$1.1 billion worth of shares which was the third highest outflow in a week this year as they were agitated by the risk of contagion from Brazil and took opportunity to take profit.
Moving on to Bursa, MIDF Research said foreign funds disposed off RM1.27 billion worth of equities for the week ended September 25 driven by concern over increasing emerging markets risk.
The research firm noted the sign was evident as foreign investors sold RM333.9 million worth of shares on September 21, the highest in 17 trading days.
Subsequently, last Wednesday, it observed the amount of shares in which foreign investors sold rose to RM546.6 million, the highest recorded in a single trading day and the second time the amount exceeded RM500 million since 2014.
As of last week, MIDF Research noted the cumulative net money outflow by foreign investors in 2015 stood at RM17.7 billion, more than the entire of 2014 of RM6.9 billion.
On another note, MIDF Research said local institutions supported the market last week.
It said local institutions bought RM1.12 billion worth of equities while retail investors bought RM145 million worth of shares.
MIDF Research added retail investors saw value at current market valuations although their participation remained moderate.
As for the counters which received the highest money inflow and outflow last week, the research firm said Public Bank Bhd (Public Bank) registered the highest net money inflow of RM39.55 million last week and Malayan Banking Bhd (Maybank) saw the largest net money outflow of RM12.15 million for the week ended September 25.