Expect more selling on the stock market, say analysts

An analyst says outflows feature over the coming months because of external factors. (AFP pic)

PETALING JAYA: Stock market analysts expect further heavy selling by foreign investors next week, but a financial analyst says Malaysians should not be worried as other Asian markets also suffered outflows.

Research analyst Adam Mohamed Rahim of Malaysian Industrial Development Finance Bhd (MIDF) said there were outflows of US$418 million from South Korea and US$1.27 billion in Taiwan this week, while the Malaysian market suffered an outflow of US$360.2 million (about RM1.44 billion).

“Outflows may feature in the near term but please bear in mind that the main trigger would be external developments such as geopolitics in the Korean peninsula and the trade war between the US and China,” he told Bernama.

Foreign selling of Malaysian stocks was higher than the previous week’s RM1.21 billion, and was at its peak on June 19 at RM555 million net, the highest in a day since May 30.

The market index closed at its lowest since February 2017 at 1,692 points on June 21, on nine straight days of losses.

MIDF expects the stock market to be a bit quiet in the next few months. Trading value has already hit a record high twice in May, at RM7.3 billion on May 14 and RM9.3 billion on May 31.

“We believe that further clarity on policies of the new government may be a catalyst to bring back investors. However, systemic factors that affect the global markets will still be the major determinant of foreign flows into Malaysia,” he said.

Economics professor Yeah Kim Leng of Sunway University Business School expected the government to raise funding for mega projects such as TRX City through bank borrowings and the capital market to reduce the more expensive borrowings taken earlier.

“Among the areas that can be improved are government guarantee schemes which could be replaced with cheaper direct loans or bonds,” he told Bernama.

Dr Yeoh said foreign outflows from the stock market was due to the combination of external and internal factors. Investors had withdrawn from emerging markets because of US and European Union policies.

Jitters on the market also arose from the political uncertainties caused by government actions to pare down debts, cancel projects and restructure the government’s coffers, he said.

Yeoh said the inflation rate was expected to stabilise with the de facto removal of the goods and services tax (GST) by zero-rating, and reinstatement of the fuel subsidy would also cap price increases.

Another MIDF economist, Muhammad Zafri Zulkeffeli, believes the ringgit will continue trading at 3.98-4.01 against the US dollar for the rest of the year, especially after the 2019 Budget and the mid-term review of the 11th Malaysia Plan are tabled in Parliament.

“At this juncture, external factors are more prevalent in weighing on the near-term outlook of the ringgit and emerging market currencies in general,” he told Bernama.

However, policy uncertainties would cause the ringgit to stay in the low range because of the review of mega projects, reformation of government agencies and companies, and adjustment in business activities with the GST zero-rated.

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