Domestic institutions continue to sell stocks

The root cause for the YTD outflows appears to be the RM117b withdrawal from the EPF


BURSA Malaysia has been underperforming in comparison to the regional market because domestic institutions are net sellers with year-to-date (YTD) outflows of RM12.9 billion compared to net inflows of RM8.2 billion in 2020, which is the largest outflow since records began.

Based on Credit Suisse’s assessment, sighted by The Malaysian Reserve, the root cause for the YTD outflows appeared to be the RM117 billion withdrawal from the Employees Provident Fund (EPF).

Last week, EPF primarily sold Malayan Banking Bhd (Maybank), CIMB Bank Bhd and Public Bank Bhd.

“Consequently, foreigners continued to be net buyers of RM359 million net worth of Malaysian equities last week, something they have been doing since August with cumulative YTD net inflow of RM4.2 billion. Last week, foreign investors primarily bought CIMB Bank, Maybank and Inari Amertron Bhd.

“Foreigners have been buyers of banks and tech (Inari) for five consecutive weeks, broadly mirroring domestic institutions,” according to the assessment.

Bloomberg’s data on performance of regional equity markets showed that Malaysia’s equity rose 0.3% in the third quarter of 2021 (3Q21) and declined 2.6% in the 2Q21.

The FTSE Bursa Malaysia KLCI (FBM KLCI) is down 6.4% YTD, while the Jakarta benchmark is up 11.24%, Bangkok decline 13.43%, while Singapore’s FTSE Straits Times rises 13.89%.

Retail Investors, Foreign Funds Boost FBM KLCI

The local benchmark has been held up by buying from retail investors and foreign funds, data suggest.

CGS-CIMB Securities Sdn Bhd analyst Ivy Ng Lee Fang said foreign investors took over as the largest net buyer last week (ended Nov 12), while local institutional investors remained net sellers.

“Foreign investors’ net buying rose significantly by 5.3x week-on-week (WoW) to RM359 million last week (from RM68 million two weeks ago). Local retail investors’ net weekly buying fell 61% WoW to RM185 million last week (from RM470 million two weeks ago).

“They were net buyers of the financial services and technology sectors. The top three net buy stocks for foreign investors last week were CIMB Bank, Maybank and Inari,” she said in a note.

Local nominee investors’ net weekly buy fell 59% WoW to RM90 million. Local institutional investors remained the only net sellers for the third consecutive week. Their net selling fell by 24% WoW to RM649 milion, widening their cumulative net sell amount to RM12.8 billion YTD.

Higher Foreign Portfolio Inflows in October

Foreign holdings of Malaysia’s bonds and equities rose further in October for the third straight month, according to UOB Malaysia’s Global Economics and Markets Research.

United Overseas Bank (M) Bhd senior economist Julia Goh said foreign buying of domestic bonds and equities extended higher by RM4.5 billion in October (September: RM1.4 billion) to bring cumulative foreign portfolio inflows to RM28.8 billion YTD.

She said this more than offset the total outflows of RM6.3 billion in 2020. In October, foreign buying of domestic bonds rose by RM2.9 billion and for equities, it increased by RM1.6 billion.

“Foreign buying of domestic bonds was concentrated in Malaysia Government Securities (MGS) and Government Investment Issues (GII), while private debt securities attracted some inflows as well. Meanwhile, foreigners sold Malaysian Treasury Bills last month.

“Overall, foreign holdings of Malaysian government bonds amounted to RM231.3 billion or equivalent to 25.4% of total outstanding as at end-October (end-September: RM225.9 billion or 25.1%),” she said in a research note.

For MGS alone, foreign investors held RM191.9 billion or 40.1% of total MGS outstanding, while foreign holdings of GII increased to RM39.3 billion or 9.5% of total outstanding as at end-October — the highest level since November 2016.

Foreign buying of domestic equities rose for the third month (October: RM1.6 billion; September: RM0.7 billion; August: RM1 billion). However, foreign ownership of Malaysian equities as a percentage of market capitalisation continues to hover at 20.2% (September: 20.4% and August: 20.2%).

Looking ahead, she said foreign capital flows into Malaysia could turn volatile as the US Federal Reserve embarks on quantitative-easing tapering, global growth and policy divergences widen, as well as continuation of strong global sovereign issuances.


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