RM138 mil in foreign funds inflow in holiday-shortened week

KUALA LUMPUR: Foreign investors were net buyers in the Malaysian equity market, pumping in RM138.6 million between Monday and Thursday, compared with RM146.8 million recorded the previous week.

Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the inflow of foreign funds was quite impressive despite external uncertainties.

“Perhaps, expectations that the US federal fund rate will reach a peak of 2.50% may have driven funds from abroad to look at emerging-market assets.

“Global prospects were also quite weak based on the recent Global Purchasing Managers’ Index (PMI) for the manufacturing sector which fell to 50.7 points in January from 51.5 points in December 2018,” he told Bernama.

However, Afzanizam said US labour markets remained strong, following the release of better-than-expected non-farm payroll data for January coupled with higher wages which could prompt the US Federal Reserve to resume monetary tightening measures should inflation continues to rise.

“If that happens, it may have an impact on capital flow and currency markets,” he said.

MIDF Research analyst Adam M Rahim said January saw foreign net inflow of RM1.03 billion, the first monthly net inflow since September 2018.

He said the weekly increase in average daily traded value, which jumped 21% to remain above RM1 billion for the second week running, was only evident among foreign investors.

For the holiday-shortened week, there were no major corporate announcements as the local market was closed for two days to usher in Chinese New Year, which fell on Tuesday.

On Friday, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) ended 2.99 points higher at 1,686.52.

Phillip Capital Management Malaysia senior vice-president (investment) Nazri Khan Adam Khan opined that the minor improvement in the fund flow indicated that Malaysia was catching up with other countries such as Indonesia, the Philippines and Thailand.

He said sentiment remained cautious, amid lingering concern following headwinds from trade tensions and global growth.

“The government should encourage more foreign investors to invest in the country as this will propel the inflow of foreign funds into our country,” he said.

On Feb 8, Finance Minister Lim Guan Eng said international investors were confident in Malaysia’s economic potential as well as the government’s ability to drive the economy forward.

He said Malaysia remained an attractive investment destination with investors.

As for the ringgit’s outlook, Nazri Khan said the local note was expected to trade at 4.00 against the US dollar this week boosted by mild buying.

“We stay slightly bullish on the ringgit in anticipation of further losses in the US dollar next week,” he said.

On Friday, the ringgit ended at a seven-month high of 4.0670/0720 against the US dollar, a level last seen on July 20, 2018, when it stood at 4.0600/0630.