The current trend of net buyers emerging among foreign investors in Bursa Malaysia will likely continue next week, thus supporting the composite index to stay above the 1,800-point level.
The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) performed favourably against other bourses in South East Asia, finishing the just-ended week at 1,808.59.
Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said the local market experienced a total inflow of RM45.9 million throughout last week amid better market sentiment.
“They (foreign funds) are currently on a buying spree. Once they start (buying), the momentum will continue, which I expect will last until the end of this month.
“I believe they are on a bargain-hunting mode after a massive sell-off last month,” he told Bernama.
During July 2 to 30, Bursa Malaysia recorded a net outflow of RM2.02 billion as weak risk appetite prolonged amid United States-China trade dispute.
The local market, however, rebounded, thereafter, luring a positive net fund inflow amid investors’ expectation of better corporate earnings coupled with improving oil prices.
Sentiment among foreign funds turned sideways in the second week of August as selling emerged on the back of geopolitical concerns over Turkey, causing a significant outflow from the local equity market.
Nevertheless, consistent buying from local funds such as the Employees Provident Fund and Retirement Fund Incorporated, as well as, growing optimism towards the possibility of positive US-China trade talks helped sentiment recover in the third week of August.
Pong also said the recent announcement by Prime Minister Tun Dr Mahathir Mohamad that the multi-billion ringgit East Coast Rail Link and Trans-Sabah Gas Pipeline projects would be scrapped for now would not have any impact on market sentiment next week as investors have already factored in this development.
Meanwhile, Bank Islam Chief Economist Mohd Afzanizam Abdul Rashid said it was too soon to tell whether equities would continue to march higher especially in the context of the ongoing trade friction instigated by the United States.
“At the same time, prospects of higher interest rates in advanced countries led by the US could also potentially shift foreign funds from the emerging markets.
“Domestically, policy direction will be closely scrutinised in order to see the potential impact on the macro economy and industries,” he said.
From the latest gross domestic product figures, Afzanizam said it was obvious that the consumer sector was the clear winner with private consumption growing at a rate of eight percent, which is above the current trend level.
Going forward, the trade tension would continue to have significant impact on equity markets and a decline in sentiment could undermine business decision on capital expenditure and staffing.
“At this juncture, there is no back down in the tariffs although there were discussions between the US government and affected businesses.
“The US government is very adamant and they mean business when it comes to unfair trade practices.
“As such, it will be critical to look at business sentiment as evident by Global Purchasing Managers' Index, which has been declining since early this year,” he explained.