KUALA LUMPUR, May 6 2019 : Foreign fund outflow from Bursa Malaysia is expected to persist as international investors are more drawn to other emerging markets, especially China and Thailand, says Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew.
“China has been doing very well since early this year, as the selling seen in December was over.
“As for the Thai stock market index, it has exceeded the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) this month after performing lower previously,” he told Bernama.
The Stock Exchange of Thailand (SET) Index closed at 1,679.05 on Friday, while Bursa Malaysia ended the week at 1,637.30.
Apart from that, Pong said, the disappointing corporate earnings since late 2017 also made the local stock market less attractive.
“We are entering into the March quarter earnings season whereby corporate announcements will be gradually made in the second half of this month, but I am ready to see more disappointing announcements coming in,” he quipped.
Commenting on fund flow, Pong said the local equity market, which was closed on May 1 for the Labour Day holiday, saw wider net foreign selling of RM295.5 million in the holiday-shortened week compared with RM72 million in the previous week, mainly dragged by the broader general sell-down of worldwide equities in the week due to the weakening New York Stock Exchange performance.
Besides, he said, the lower participation of both local institutions and retail investors on April 30, mainly due to the introduction of T+2 settlement cycle which began on April 29, also contributed to the weaker fund performance for this week.
“We saw only 39 per cent participation by the local institutions on April 30 compared to the normal participation rates of 45-50 per cent, and as for local retail investors, there was only 21 per cent participation on April 30, when it could have hit up to 34.2 per cent like what we saw on April 22, 2019.
“Investors have become more cautious following the introduction of the T+2 settlement cycle, resulting in the anticipated selling from both local institutions and retail investors,” he said.
The T+2 scheme, which aims at shortening the settlement cycle, would reduce counterparty risk, improve operational efficiency, strengthen market’s competitiveness and increase global harmonisation.
Meanwhile, on the ringgit’s performance, Kenanga Investment Bank Bhd head of economic research Wan Suhaimi Wan Mohd Saidie expects the local note to remain at between the 4.10 and 4.15 level against the US dollar in the first half of this year, backed by the strong economic fundamentals of the country.
“Malaysia still has a decent current account surplus, sustainable domestic demand growth, and a well-managed and stable financial system; hence I believe there would be strong fundamentals for the ringgit,” he told Bernama.
Wan Suhaimi said the local note is still relatively undervalued now as investors are looking for a clearer direction on policies and political stability, which could put Malaysia at the forefront compared to other countries.
As for the overnight policy rate (OPR) cut anticipation, Wan Suhaimi said in line with global economic slow down, investors have already discounted the possibility of an OPR cut of 25 basis points, which has been shown in the current level of the ringgit.
At Friday’s close, the ringgit was quoted at 4.1410/1440 against the greenback.
Bank Negara Malaysia will be holding its Monetary Policy Committee meeting on May 7 to determine whether to cut or maintain the OPR. – Bernama