Foreign funds dump Malaysian shares at fastest pace since 2008 

(The Sun Daily) – Weaker growth outlook and worries over the US Federal Reserve (Fed) tapering talks spurred foreign investors to dump local shares at its fastest rate since the global financial crisis in 2008.

MIDF Research in a report yesterday calculated that the outflow of foreign funds from local equities amounted to RM2.9 billion last week.

Overseas investors, it said, dumped RM1 billion worth of stocks last Tuesday, the biggest single-day sell-off by foreigners in almost four years.

Last week’s rout was the fourth straight weeks of deficit on Bursa Malaysia. During the four-week period, a total of RM4.9 billion of foreign money had left the Malaysian equity market.

“The intensity of foreign selling had increased in a rather sudden manner,” MIDF Research head Zulkifli Hamzah said, noting that the foreign participation rate had surged to two-month high last week.

He estimated that the cumulative purchases by foreigners stood at RM8.5 billion as of last Friday, which means that despite the huge sell-off last week, foreign liquidity in the local stock market remained “very high”.

Shares on Bursa Malaysia fell 3.8% last week, although a rebound yesterday trimmed some of the losses. The ringgit weakened from 3.28 to 3.30 against the US dollar.

While Bursa Malaysia took the brunt of the foreign sell-off, markets in Indonesia and Thailand were hit harder as their key indices plunged 8.7% and 7.4% respectively.

In Jakarta, the government announced a package of stimulus aimed to shore up the rupiah, which had dropped 5% in August.

Sentiment in Thailand was shaken after the country unexpectedly fell into a mild recession after the economy contracted in the second quarter. Last week, Thailand revised its official 2013 growth forecast to between 3.8% and 4.3%.

MIDF Research noted that the only market out of seven Asian markets it tracked that was spared the sell-off last week was South Korea.

“Korean stocks are attracting interest as corporate profits are rising,” it said.

Despite the heavy sell-off by foreigners, the benchmark FBM KL Composite Index is holding up above its 200-day moving average line.

This is a good sign as its means the long-term support for the index is still intact, said MIDF Research.

Strong support from local institution is expected to cushion any sudden drop in prices, as evidence last week when local funds net buying jumped to RM2.65 billion worth of stocks.

The market will also be looking at companies releasing their June quarterly numbers this week for direction.