Foreign outflows unrelated to MRT2 fallout, says Lim

By P PREM KUMAR & ALIFAH ZAINUDDIN / Pic By TMR

The government’s recent decision to end the Mass Rapid Transit Line 2 (MRT2) underground deal with MMC-Gamuda KVMRT (T) Sdn Bhd was not the reason for the massive selldown on Bursa Malaysia last week, said Finance Minister Lim Guan Eng.

Lim attributed the loss in foreign investments to external factors that have affected global markets, citing jitters arising from the souring US-China relations, uncertainties in Europe and diplomatic tensions between the US President Donald Trump administration and the Middle East.

“The downfall of shares last week was not because of one or two companies. Their impact was not that big and it was not just Bursa Malaysia.

“Global equity markets are affected by the trade war between the US and China, and other external factors,” he told the Dewan Rakyat yesterday.

Lim was responding to a question by Pontian MP Datuk Seri Ahmad Maslan who had asked for an explanation for the withdrawal of RM1.05 billion in foreign funds from the local equity market last week — the largest weekly foreign net outflow in 16 weeks.

“Malaysia tends to be placed in the same basket as our regional peers, so I suggest that we go to all major rating agencies, after Budget 2019, to tell them our situation in Malaysia and promote the domestic equity market.

“Hopefully, it will be more liquid in future,” Lim said.

Last week, the federal government decided to terminate the MRT2 underground contract after it failed to get the joint-venture unit of MMC Corp Bhd and Gamuda Bhd to reduce costs on the RM16.71 billion works portion as part of the federal administration’s rationalisation efforts.

Analysts estimate the contract termination will result in an estimated loss of RM5.5 billion in outstanding work for both companies and will negatively impact their future cashflow. MMC and Gamuda have since lost a combined RM2.6 billion in market capitalisation.

According to Lim, investment outflows from Malaysia’s equity market between May 10 and Oct 13 amounted to US$3 billion (RM12.5 billion).