By G. Sharmila
Foreign funds sold RM19.5 billion (US$5 billion) in Malaysian equities last year, with the outflow being the highest among the seven Asian markets tracked by MIDF Research.
“It was also the most severe foreign attrition since the 2007/2008 Financial Crisis,” MIDF Research said in its weekly fund flow report today.
According to the research house, foreign funds sold for 20 consecutive weeks during the May-September period, one of the longest sustained stretches of foreign attrition since the 1997-1998 Asian Financial Crisis.
“The most unnerving period was the back-to-back trading week ended Aug 14 and Aug 21 when the withdrawal amounted to RM1.42 billion and RM1.35 billion nett respectively.
“In October, foreign funds made a promising return which coincided with the ringgit regaining some lost ground. However, developments at the global level were against the local bourse, and the buying in October proved to be fleeting,” MIDF noted in its report.
The research house said that in the last trading week of 2015, foreign funds surprisingly bought a significant RM546.2 million nett, in the open market, reversing four successive weeks of attrition.
“That translated into a deficit of RM1.19 billion for the month of December, which could have been worse in view that it was the pivotal month during which the Fed raised interest rates for the first time in almost a decade,” the research house pointed out.
“After the heavy attrition from Bursa in 2015, we estimate that the overhang of foreign liquidity for funds that had entered the local market since January 2010 to be only in the region of RM8 billion to RM9 billion,” it added.
MIDF said that the fact remains that foreign shareholding on Bursa is relatively thin and is currently the lowest since the Financial Crisis. “The downside risk as a result of foreign dumping is therefore rather limited,” it said.
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