The Malaysian stock market should be able to withstand the tide of foreign selling by foreign fund managers as the economy is fundamentally strong, according to Kenanga Investment Bank Bhd.
“There is nothing to worry, the exit of foreign investors is part and parcel of market cycles. I do not think there is anything more to it. These are cycles that are normal to the market, as investors will invest and divest, depending on their portfolio rebalancing needs,” Kenanga executive director and head of equity broking Lee Kok Khee said at a briefing.
“If you look at the profile of the Malaysian market, it is a good mix of both domestic and foreign institutions.
“The Malaysian market is actually anchored by the local institutions that give us a very strong base and demand,” he added.
Analysts said the relentless selldown had, in part, caused the sentiment in the local stock market to be shaky in September and thus far in October.
Notably, net foreign selling in Malaysian equities intensified and seemed to have peaked in the week ended Sept 19, with the market registering its biggest outflow then since March this year, according to statistics from MIDF Research.
Earlier reports had indicated that the outflow from Malaysian equities during the week of Sept 19 had risen to RM635.8mil, excluding off-market deals, compared with RM197.3mil in the preceding week.
According to Bursa Malaysia statistics cited by Kenanga, local institutions have been the biggest traders in the local stock exchange in the past three years and had accounted for 50.54% of the average monthly trading value of RM89bil from January 2014 to July 2014.
Foreign institutions accounted for 24.73% of all trades on Bursa Malaysia, while retail participation had matched foreign participation in this period.
Retailers had also seen an increased trend of trading participation on the local bourse from 22.1% of the average trading values in 2012 to 21.75% in 2013.
Notably, the average monthly trading volume from January-July 2014 had risen to a three-year high of RM89bil from RM82bil in 2013 and RM68bil in 2012.
