RM253m foreign buying good sign for local market

by BERNAMA/ pic by TMR File

THE net inflow of RM253.4 million between Monday and Thursday in the first week of July, is a good sign for the domestic equity market.

However, market players continue to be on the lookout for uncertainties at the global and local levels.

Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew, said the performance during the first week of July 2019, surpassed that of the entire month of June, which saw a net inflow of RM87.9 million and net outflow of RM134.6 million.

“Even though the market saw profit-taking activities last Thursday, a net outflow was only recorded after six straight days of net inflows, which is a good sign,” he said.

Pong opined that there are still concerns about the trend in the equity market as there is a possibility that net buying could go on for an extended period. “The current pattern is similar to the one recorded early this year when net buying was strong from Jan 9 to Feb 8. But then the trend reversed,” he added.

He said the huge decline in the Malaysian cash market in the fourth quarter of last year saw foreign investors — including funds across the globe — going on bargain hunting activities.

After the cash market recovered, the funds started to let go of their stocks.

“The current situation is similar to the previous cycle, because the benchmark index fell to its lowest somewhere in May and continued to decline, reaching its lowest point since August 2016. Hence, we believe that bargain hunting will emerge,” said Pong.

On another note, he said the China-US trade war would continue to be a key theme this year.

“Meanwhile, the possibility of the US Federal Reserves (Fed) reducing the interest rate is positive news. The global markets rallied for almost three weeks when the Fed announced a lower interest rate years ago.

“Markets went up, including the Malaysian market,” he said.

Meanwhile, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the average foreign fund participation ratio between July 1 and July 4 stood at 22.5% versus 29% between June 24 and June 27.

He said foreign funds inflows were quite impressive despite external uncertainties.

“The Group of 20 summit in Japan last week saw another round of ceasefire between the US and China and it has resulted in positive sentiments in the equities market,” he told Bernama.

Mohd Afzanizam said in June, the US ISM Purchasing Managers Index declined to 51.7 points for the third month in a row due to weak business sentiments, while the inflation rate was below the 2% target.

“The unfavourable scenario raised a question of the timing of the rate cut and the quantum,” he said.

He said the market’s sentiment remained cautious amid lingering concerns following the headwinds from trade tensions and global growth.

As for ringgit movement, Mohd Afzanizam said inflows of funds from foreign investors in the past two weeks provided support for the currency.

“The impact of the trade war on the local currency has somewhat subsided and the potential rate cut by the Fed

has bolstered the optimism for better growth ahead,” he said.

Nonetheless, Mohd Afzanizam said the trade conflict is still fluid and could take a sudden turn.

“In that sense, the appreciation of ringgit is quite limited,” he said.

The ringgit retreated at last Friday’s closing after recording gains for two consecutive days, as investors remained cautious ahead of the US non-farm payrolls (NFP) data.

The local currency stood at 4.1340/1370 versus the greenback compared to Thursday’s close of 4.1310/1350.

The NFP data, which was released last Friday, showed that more jobs were created in June, calming fears of a sharp slowdown.

The closely-watched NFP rose by 224,000 in June, up from a downwardly-revised 72,000 in May.