Foreign fund outflow may be higher in October

by SHAZNI ONG / pic by RAZAK GHAZALI

FOREIGN net selling of Malaysian equities extended for the third consecutive week as investors sold RM543.91 million in the first week of October, compared to RM350.85 million a week before.

“Comparatively, for the cumulative data for the month of September, foreign investors were net sellers to the tune of RM1.43 billion, bigger than the preceding August at RM1.19 billion worth of equities.

“If this trend continues, we might see higher foreign fund outflow for the month of October,” MIDF Amanah Investment Bank Bhd (MIDF Research) said in a note yesterday.

The research firm said retailers were net sellers of RM171.54 million worth of equities last week, with local institutions at RM715.48 million net during the same period.

This marks the second consecutive week of local institutions as net buyers on Bursa Malaysia, MIDF Research noted.

As the market reopened last Monday, MIDF Research said foreign investors sold RM292.6 million net of local equities, with retailers and local institutions stood as net buyers at RM47.5 million and RM245.2 million respectively.

“However, this outflow lessened as the week went by, with last Tuesday’s and Wednesday’s net selling falling to RM167.9 million and RM83.8 million respectively. The largest outflow was last Monday at RM292.6 million and smallest outflow was last Thursday at RM57.75 million.

“This reversed last Friday with a foreign inflow of RM58.1 million. This is probably due to renewed interest in glove stocks as the Covid-19 pandemic seems to be on a cusp of a second wave.

“Furthermore, the financial markets were shocked by news that US President Donald Trump has contracted Covid-19,” the firm said.

In terms of participation, MIDF Research said retail investors recorded a weekly decrease of 19.37% in average daily trade value (ADTV), while foreign investors experienced an ADTV decrease of 3.66%.

“To note, local institutions also saw a decrease of 23.13% in weekly ADTV,” MIDF Research added.

While the financial market has seen sustained portfolio outflows, total approved investments in the primary, manufacturing and services sectors recorded RM64.8 billion in the first half of the year (1H20), which is 38.4% year-on-year (YoY) lower compared to a year ago.

“Manufacturing investment approvals were supported by strong domestic manufacturing investments that surged by almost 80% YoY to RM17.9 billion,” United Overseas Bank (M) Bhd senior economist Julia Goh said in a note yesterday.

Goh added that more than two-thirds of overall manufacturing investments in 1H20 were new greenfield projects.

“Key subsectors were petroleum refineries and products, machinery manufacturing, electrical and electronics products, food manufacturing, and scientific and measuring equipment.

“Sabah, Penang, Johor, Selangor and Terengganu were the top five states garnering the most manufacturing investment interest,” she said

Foreign sources of approved manufacturing investment primarily came from Singapore, Switzerland, the US, China and Thailand.

Despite the ongoing pandemic effects and downside risks to the global and Malaysia economic outlook, Goh said year-to-date investment approvals represented 61.8% of Malaysia’s full-year approved investment during the 2009 Great Financial Crisis and have already hit 64.8% of the firm’s 2020 full-year target of RM100 billion.