KUALA LUMPUR: International funds have sold RM293.5 million net in the holiday-shortened week of July 29 to Aug 1, about six times more than the RM53.4 million disposed of during the whole of last week. MIDF Amanah Investment Bank Bhd Research (MIDF Research) analyst Adam Mohamed Rahim said the bulk of the foreign net outflow was attributed to July’s last trading day on Wednesday, which saw a sell-off worth RM334.3 million net ahead of the Federal Reserve’s policy meeting amid the stalemate in US-China trade talks.
“Nevertheless, August started on a positive note as foreign investors mopped up RM40.6 million on Thursday, driven mainly by Press Metal Aluminium Holdings Bhd as it signed a power purchase agreement with Syarikat Sesco Bhd, a unit of Sarawak Energy Bhd,” he told Bernama.
Press Metal secured up to 500 megawatts (MW) of electricity for its proposed third aluminium smelter plant at Samalaju Industrial Park, Sarawak. “On a year-to-date basis, the foreign net outflow from Malaysia remains above RM4 billion in contrast with other regional peers that are experiencing foreign net inflows,” Adam added.
Meanwhile, Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said foreign selling is expected to continue this week, following the losses recorded on Bursa Malaysia on Friday, which saw the FBM KLCI shed 12.31 points to end at 1,626.76. “Looking at the size of the drop on Friday, most likely the selling will continue for couple more days next (this) week, one or two more days at least and then it would take a breather,” Pong added.
On Wednesday, the US Federal Reserve reduced its key benchmark interest rate by 0.25 percent to a range of two percent and 2.25 percent in the first reduction in borrowing costs since the financial crisis a decade ago.
However, investors were disappointed at the vague direction of the US interest rate cuts after the Federal Reserve signalled that there would not be an extended series of rate cuts. He said the equities markets also reacted negatively to President Donald Trump’s threat to impose an additional 10 percent duties on about US$300 billion worth of Chinese imports beginning from next month.
On Friday, China warns of retaliatory measures in response to Trump’s announcement that could plunge the two countries in a deeper trade war, magnifying the potential damage to both economies.
Meanwhile, OCBC Treasury Research has maintained its call for another 25 basis points cut in US interest rate cut in September and possibly another 25 basis points interest rate cut in December.
This is amid the inconclusive end to the most recent USChina trade talks in Shanghai and Donald Trump’s sustained pressure on US Federal Reserve chairman Jerome Powell to keep up with monetary policy easing ahead of the 2020 presidential election as well as continued signs of deceleration in the global economic momentum.
Meanwhile, Malacca Securities Sdn Bhd saw prospects for further recovery from an oversold position earlier last week, but the continuing weaknesses on Wall Street may keep the recovery in check over the near term. It added that the global markets are rocked again by the US’ move to impose new tariffs on China goods that are unlikely to leave the local market unscathed. – Bernama
