PETALING JAYA- Net foreign selling in Malaysian equities intensified in the week ended Sept 19, with the market registering its biggest outflow since March this year, amid concerns over the timing of US interest rate normalisation and Bank Negara's decision to maintain the country's overnight policy rate (OPR).
In the third consecutive week of foreign selling, outflow from Malaysian equities (excluding off-market deals) rose to RM635.8 million ($249 million), compared with RM197.3 million in the preceding week.
The foreign money outflow in the week ended Sept 19 was the highest since March, MIDF Research said in its fund flow report. "The heavy foreign money outflow last week partly reflects expectations of the ringgit's weakness after Bank Negara's monetary policy committee decided to maintain the OPR at 3.25 per cent," MIDF head of research Zulkifli Hamzah said in his report.
"Continued pressure on the ringgit is likely to remain a dampening factor on equity prices this week," he added.
According to MIDF, foreign investors sold every day last week, with the sell-down peaking on Monday with an outflow of RM225.1 million, before the Malaysia Day holiday break.
"On cumulative basis, foreign investors remain net sellers of Malaysian stocks in 2014, and the net outflow as of last Friday has increased to RM2.6 billion," Zulkifli noted. Last year, Malaysia reported a net inflow of RM3 billion.
According to Zulkifli, foreign participation rate was "elevated" last week, as daily average gross purchase and sale surged to a seven-week high of RM1.22 billion, while local participation rate declined, partly due to the school holidays.
"In the retail market, the average daily gross purchase and sales fell further to RM832 million, the lowest in 12 weeks. "However, retailers started bargain hunting, as they were net buyers for the first time in 23 weeks, buying a marginal RM19.2 million," he said
Zulkifli added that local institutions supported the market strongly last week, buying RM616.6 million, on slightly lower, but still elevated, participation of RM2 billion.
Regional market wise, sentiment towards Asian equity remained dampened for the second consecutive week as global funds made an exit, reflecting heightened risks pertaining to the timing of the normalisation of US interest rates, Zulkifli said.
"Funds classified as 'foreign' were, in aggregate, net sellers of stocks in the seven Asian exchanges that we track (South Korea, Taiwan, Thailand, Malaysia, Indonesia, the Philippines and India)," Zulkifli noted, pointing to the significant increase in net foreign outflow from the region from US$114 million in the week ended Sept 12 to US$1.03 billion last week.
An analyst told StarBiz that foreign selling could persist this week, albeit at a moderated pace compared with last week.
"Foreign selling could have already peaked last week," the analyst with a local research house said. "But sentiment towards the region has yet to recover amid the persistent headwinds against the global economy," he noted.