Foreign investors continue to SELL DOWN M'sian equities amid external & internal concerns
PETALING JAYA - The first 10 trading days of the year saw a net sale of RM1.54 billion in equities by foreign funds, suggesting that foreign appetite for Malaysian equities in the secondary market is likely to be "unexciting" this year, MIDF Research said in its weekly fund flow report.
"The unwinding of the Fed's quantitative easing (QE3) and the spectre of interest rate rising in the US, possibly in 2015, will remain a dampener on demand. However, foreign demand for primary market offerings is expected to remain healthy, specially those issues which are sizeable," head of research Zulkifli Hamzah said.
He added that there remains that the overhang of foreign liquidity in Malaysian equities is still very high despite the steady exit in the last six months or so.
"We estimate the current overhang of the foreign portfolio fund to be more than RM30 billion, which is more than twice the amount of money that had left since last year. Therefore, the threat of an 'exodus' is still a clear and present risk although in our opinion, it will require a crisis to trigger it," Zulkifli said.
He added that the fact is the outflow of foreign portfolio capital from Malaysian equity has been significant, and is in line with what is happening in the Southeast Asian emerging markets.
Zulkifli opined that the rate of outflow has, thus far, been relatively "manageable" in several regards: equity prices have held ground, supported by local liquidity; rates in the money and forex markets have remained steady, albeit with some increase in volatility; and the outflow has not been disruptive to funding and capital-raising activities.
In comparing the flow of foreign funds for the first 10 trading days this year and in 2013, MIDF Research said foreign funds made a net purchase of RM1.58 billion in 2013, which conincided with the announcement of an upsized QE3 in Dec 12, 2012, from US$40 billion to US$85 billion (RM132 billion to RM281 billion).
The overall flow of foreign funds into and out of Malaysian equity was also relatively extreme in 2013, in terms of the size of the movement, it was probably the most volatile year yet on record, Zulkifli said.
Between Jan 2, 2013 and May 22, 2013, a cumulative total of RM18.9 billion (net) of foreign funds had entered Malaysian equity via the open market (i.e excluding off-market transactions). Since then, a total of RM15.9 billion has left, leaving only RM3.0 billion left at the end of 2013. In 2012, RM13.7b entered the market, and the traffic flow was effectively one-way.
Foreign participation in the first week or so of 2014 was relatively similar to that recorded in 2013. However, there had been a noticeable spike in activity in the last two days of trading this year, with participation rate (i.e gross purchase and sale) exceeding RM1 billion. Indeed, participation rate hit RM1.67 billion on Wednesday, the highest since Sept 30, 2013 last year when the US government was in the midst of being forced to shut down.
MIDF Research expects a slow start to the week due to a public holiday in the US (Martin Luther King Jr Day) yesterday and the situation in Thailand as the Feb 2, 2014 election looms, which is causing the regional risk premium to increase.
It expects follow-through selling by global funds of SEA markets. - The Sundaily
PETALING JAYA - The first 10 trading days of the year saw a net sale of RM1.54 billion in equities by foreign funds, suggesting that foreign appetite for Malaysian equities in the secondary market is likely to be "unexciting" this year, MIDF Research said in its weekly fund flow report.
"The unwinding of the Fed's quantitative easing (QE3) and the spectre of interest rate rising in the US, possibly in 2015, will remain a dampener on demand. However, foreign demand for primary market offerings is expected to remain healthy, specially those issues which are sizeable," head of research Zulkifli Hamzah said.
He added that there remains that the overhang of foreign liquidity in Malaysian equities is still very high despite the steady exit in the last six months or so.
"We estimate the current overhang of the foreign portfolio fund to be more than RM30 billion, which is more than twice the amount of money that had left since last year. Therefore, the threat of an 'exodus' is still a clear and present risk although in our opinion, it will require a crisis to trigger it," Zulkifli said.
He added that the fact is the outflow of foreign portfolio capital from Malaysian equity has been significant, and is in line with what is happening in the Southeast Asian emerging markets.
Zulkifli opined that the rate of outflow has, thus far, been relatively "manageable" in several regards: equity prices have held ground, supported by local liquidity; rates in the money and forex markets have remained steady, albeit with some increase in volatility; and the outflow has not been disruptive to funding and capital-raising activities.
In comparing the flow of foreign funds for the first 10 trading days this year and in 2013, MIDF Research said foreign funds made a net purchase of RM1.58 billion in 2013, which conincided with the announcement of an upsized QE3 in Dec 12, 2012, from US$40 billion to US$85 billion (RM132 billion to RM281 billion).
The overall flow of foreign funds into and out of Malaysian equity was also relatively extreme in 2013, in terms of the size of the movement, it was probably the most volatile year yet on record, Zulkifli said.
Between Jan 2, 2013 and May 22, 2013, a cumulative total of RM18.9 billion (net) of foreign funds had entered Malaysian equity via the open market (i.e excluding off-market transactions). Since then, a total of RM15.9 billion has left, leaving only RM3.0 billion left at the end of 2013. In 2012, RM13.7b entered the market, and the traffic flow was effectively one-way.
Foreign participation in the first week or so of 2014 was relatively similar to that recorded in 2013. However, there had been a noticeable spike in activity in the last two days of trading this year, with participation rate (i.e gross purchase and sale) exceeding RM1 billion. Indeed, participation rate hit RM1.67 billion on Wednesday, the highest since Sept 30, 2013 last year when the US government was in the midst of being forced to shut down.
MIDF Research expects a slow start to the week due to a public holiday in the US (Martin Luther King Jr Day) yesterday and the situation in Thailand as the Feb 2, 2014 election looms, which is causing the regional risk premium to increase.
It expects follow-through selling by global funds of SEA markets. - The Sundaily
