KUALA LUMPUR: Foreign funds turned net sellers as of Thursday with an outflow of RM44.1 million as compared to RM3.4 million inflows in the previous week, amid uncertainties over US-China trade talks.
The optimism of a trade deal after the US and China agreed to roll back tariffs on each other’s goods in phases waned a little bit after reports suggested that the plan has met opposition from some advisers to US President Donald Trump.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said traders were still unconvinced with the latest news although the possible rollback of previously imposed import tariff would mean both parties could be reaching a common ground that would resolve the trade conflicts.
“The jury is still out since we know from past experience that the outcome of the trade discussions can be very fluid. So investors would want to wait further for more convincing evidence,” he told Bernama.
However, he said Bank Negara Malaysia’s (BNM) decision to keep the overnight policy rate (OPR) at three per cent had increased the country’s attractiveness in terms of investment return as evidenced by the appreciating ringgit against the US dollar.
“The BNM’s decision to keep the OPR at three per cent has led to a widening interest rate differentials with the US at about 125 to 150 basis points. This would imply that investment returns in ringgit would be higher than the US assets,” he said.
Going forward, he said investors would be monitoring closely the release of corporates’ third-quarter financial results.
“Investors would be scrutinising the forthcoming corporate results for the third quarter. So, I expect the FTSE Bursa Malaysia KLCI to move range-bound,” he said.
At Friday’s close, the ringgit was quoted at 4.1310/1360 against the greenback from 4.1640/1670 the week before.
News emerged yesterday that China and the US have agreed to roll back tariffs on each others’ goods as part of the “first phase” trade deal, offering a new sign of progress despite ongoing divisions about the months-long dispute.
The agreement is aimed to be signed before the end of the year.
Meanwhile, Mohd Afzanizam said BNM’s announcement to impose a cash transaction limit starting next year was not expected to impact fund flow.
“In fact, it should be good for e-commerce players since there will be an urgent need for e-commerce solutions. In that regard, there could be an opportunity for the technology sector that specialises in e-commerce solutions,” he said. — Bernama