PETALING JAYA: Foreign investors bought RM2.4bil net of Malaysian equities on the open market during the week ended March 29, a surge in buying activities compared with only RM193mil the week before, said MIDF Equity Research.
In its report issued yesterday, the research house said foreign funds were in the market to buy Malaysian equities for the 16th consecutive week, and “believed last week's tally was among the highest ever”.
Inter-Pacific Research Sdn Bhd head of research Pong Teng Siew said the “unusually” huge inflow seen last week, the largest net inflow since the 2008 financial crisis, was probably associated with the strengthening of the US dollar. Year-to-date, the greenback was firmer against the ringgit by 1.15%.
“The US dollar has come out from a weak spell, which lasted for a period from 2002 to 2007.
“Now that the greenback has strengthened again, it allows US dollar-based investors to buy more,” he said.
He said a similar trend was seen in 1995 and 1996, when there was a large inflow of funds into the emerging markets.
He added that the large inflow was a means of window-dressing by foreign investors in a bid to push the benchmark FTSE Bursa Malaysia KL Composite Index (FBM KLCI) up for a nicer wrap of the first quarter.
“What's interesting on a weekly basis is that foreign investors have been net buyers since December 2012. There were days when they slowed down, but they have remained net buyers on a weekly basis,” he said.
However, he noted that the FBM KLCI was still lower on a quarter-on-quarter basis, falling 1.03% compared to the previous quarter.
Entering a new week, he expected the momentum to slow down, although the net inflow would remain.
“The strong buying momentum might come to an end this week or early next week as it cannot be sustained,” he said.
From a slightly longer-term perspective in comparison with the regional markets, he said the Malaysian equity market was performing better than South Korea, Taiwan, Hong Kong and Singapore, but underperforming some of its South-East Asian counterparts like the Phillipines, Indonesia and Thailand.
On the exceptionally large funds that flowed in last week, Areca Capitalchief executive officer Danny Wong said monetary policies from major economies “are here to stay”, resulting in “hot money” flowing into Asian markets in the hope of seeking “good returns”.
“Foreign investors might shy away from the Malaysian market due to the election risk and that it is a defensive market.
“They probably seek high-growth markets, and after gaining some returns, might want to rebalance their portfolio and pull out from other markets to invest here,” he said.
As for local funds, which have been net sellers, Wong observed that some investors might be preserving cash to buy during dips, while others would rather manage risks than aim for high returns.
He said foreign buying outpaced local buying, as foreign investors saw opportunities in the Malaysian market, which has been one of the worst performers year-to-date due to the latent general election risk, presenting attractive valuations compared to regional peers in the process.
Meanwhile, local fund managers remained cautious as they were close to the situation, but were under pressure to perform because the FBM KLCI was heading north last week, he added.
Source: The Star
