Sell-down on Bursa Malaysia losses to end soon, say analysts

The selling pressure was seen on counters such as Hong Leong, PetDag and Westports


The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) will not extend its losses beyond eight days at the most — as the selling activity by foreign investors should eventually exhaust due to improving buying momentum, said analysts.

Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew believes the losses seen on Bursa Malaysia will usually last not more than seven to eight trading days.

“Last week, the outflow peaked, and I believe selling today has been less aggressive — which would then gradually taper off by tomorrow’s trading,” Pong told The Malaysian Reserve (TMR) when contacted recently.

The FBM KLCI extended its losses for the seventh day running yesterday, falling marginally by 1.35 points, or 0.08%, to 1,764.24 at the close yesterday after the index opened about two points lower at 1,767.62.

The selling pressure was seen on counters like Hong Leong Financial Group Bhd, PPB Group Bhd, Petronas Dagangan Bhd (PetDag), British American Tobacco (M) Bhd, Hap Seng Consolidated Bhd, MISC Bhd, Hong Leong Bank Bhd, Westports Holdings Bhd, Kuala Lumpur Kepong Bhd, Telekom Malaysia Bhd and RHB Bank Bhd.

Gainers included Malayan Banking Bhd, CIMB Group Holdings Bhd, Axiata Group Bhd, Petronas Chemicals Bhd, Tenaga Nasional Bhd, Sime Darby Bhd, YTL Corp Bhd, Astro Malaysia Holdings Bhd, Genting Bhd, Maxis Bhd and DiGi.Com Bhd.

September has been a less than impressive month for the local bourse, with the benchmark index down 5.39 points for the month.

According to MIDF Research, foreign investors offloaded RM477.7 million worth of stocks last week.

“It was the first time foreign investors sold more than RM400 million this year, making it the largest withdrawal so far.

“The last time foreign selling reached such levels was back at the end of December 2016,” MIDF noted in its weekly fund flow report.

Additionally, international investors were net sellers on three out of four trading days last week.

The foreign participation rate dipped last week amid the surge in outflows.

The foreign average daily trade value (ADTV) declined by a staggering 24% to retreat below the RM1 billion mark to settle at RM861 million.

In contrast, retail participation remained healthy for the week.

MIDF said the retail ADTV increased by 7% from RM940 million to breach the RM1 billion mark for the first time in 17 weeks.

However, Pong reckoned that external factors — like the US-North Korea geopolitical tensions and the US

Federal Reserve’s (Fed) move to shrink its balance sheet — are partly impacting the market.

The other driver for the slow month was due to rather disappointing corporate results for the second quarter (2Q) this year.

“The 2Q results have been disappointing, especially among the small-cap and medium companies,” he told TMR.

He pointed out that although blue-chip companies were reporting strong quarterly results compared to last year, the level is a far cry from the period between 2013 and 2015.

On a separate note, Kenanga Research said the quantitative tightening activity, which was scheduled to begin in October, posed the greatest risk to emerging markets.

“The move might trigger a sell-off in equity markets due to an outflow of foreign funds,” it said.

Pong added that overseas funds have soured on Malaysian equities since the last few days because of its “richer valuations and slower than prompting them to look for opportunities elsewhere.

Rakuten Trade Sdn Bhd research VP Vincent Lau believes it is not all doom and gloom for the local market, and that the current foreign outflow is not a major problem.

“The market is reacting to the Fed’s move to shrink its balance sheet by US$4.5 trillion (RM18.9 trillion) through quantitative tightening, but it is not too bad.

“While it’s true that most market players are getting jittery as valuations are pricier, elections are lurking and Budget 2018 will soon be announced.

“It is every market player’s intention to make their money and exit the market in anticipation of anything huge,” he told TMR.

Lau believes the current foreign outflow is not a major problem as year-to-date, the cumulative net inflow is at a safe level.

“It has just been a handful of foreign outflows days, which is only nine out of 38 weeks, so it is alright,” he said.