KUALA LUMPUR, Oct 6 — Foreign funds remained as net sellers on the local equities market as investors weighed the rising possibility of a recession in the United States (US).
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said from Sept 30-Oct 3, foreign net outflow stood at RM581.1 million, compared with RM13.6 million on Sept 23-26.
“Weak economic numbers coming from the US such as the ISM index for the manufacturing sector, which fell to 47.8 points in September from 49.1 points in August, has renewed fears of a recession in the US.
“This has led to greater demands for safe haven instruments such as the US Treasury securities, which fell significantly to 1.52 percent from above 1.6 percent previously,” he told Bernama.
He said this fear caused foreign investors to be cautious in the global market with a risk-off mode, which has subsequently taken a serious toll on the Malaysian equities market.
Afzanizam said average foreign participation in Bursa Malaysia declined to 26.43 per cent this week compared with 29.57 per cent recorded on Sept 23-26.
“Next week, the FTSE Bursa Malaysia (FBM KLCI) is expected to trade range bound as the market will be waiting for the outcome of the trade talks between the US and China,” he added.
Meanwhile, Philip Capital Management senior vice-president (investment) Datuk Dr Nazri Khan Adam Khan expects Bursa Malaysia to further weaken next week, with the benchmark FBM KLCI likely to languish towards the 1,540 level following concerns over a global slowdown, falling ringgit against the US dollar and recession.
He said the recent discouraging US manufacturing data suggests that global economic growth is decelerating due to the prolonged trade tensions.
However, he said the local benchmark bears should pause for a breather ahead of the tabling of the 2020 Budget next week.
“The tabling of the fiscal budget formulated under the Pakatan Harapan-led government will be a positive catalyst for the local market, a turning point for the government to restore public confidence to the financial market.
“Along with the elevated uncertainty and potentially deeper global economic slowdown, an expansionary budget is expected without compromising on the fiscal consolidation,” he added.