Kuala Lumpur skyline. Photo: Bernama

Wuhan Virus Impact

KUALA LUMPUR: Foreign investors were net sellers in the local equity market last week, recording a total net outflow of RM409.14 million from Jan 28-30 against a net inflow of RM23.48 million from Jan 20-23.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said this came after news about the 2019 novel coronavirus outbreak continued to hog the limelight. 

“The average participation rates for foreign and local institutions stood at 19.45 per cent and 44.91 per cent, respectively, compared with 18.4 per cent (foreign institution) and 54.0 per cent (local institution) in the same period the previous week,” he told Bernama. 

The local institution recorded RM115.73 million worth of net buying during Jan 28-30 period, compared with a net selling of RM48.51 million during Jan 20-23 period. 

Meanwhile, the net fund flows for the local retail recorded a net buying of RM293.41 million, with an average participation of 35.64 per cent during the Jan 28-30 period compared with a net buying of RM25.03 million, with an average participation of 27.97 per cent during the previous period.

Afzanizam said the markets remained cautious about coronavirus as the World Health Organisation (WHO) had already classified the outbreak a Public Health Emergency of International Concern, suggesting its severity.

However, the WHO commended efforts by the Chinese authorities for its handling of the outbreak and sharing of the latest information on the extent of its transmission.

“In a nutshell, it’s a risk-mode during the week,” he said. 

On a similar note, AxiCorp’s chief market strategist Stephen Innes said the negativity in the sell-off took place when coronavirus fears took over among market traders as they were quick to throw their rational capital away. 

“There has been some struggle for inflows in the region this week, but if the incidence of virus spread starts to slow down next week, I expect that market will be hunting for yields, especially for the undervalued equities and bonds, should the US Federal Reserve comes out with a dovish tone,” he said.

Innes said if the virus quickly de-escalate, fund inflows into markets like South Korea, Malaysia and Australia were his top picks for next week, given that those countries were among China’s biggest trade partners. 

“Besides that, the stabilising of the Chinese yuan against the US dollar, which has traded below RMB7.0 to $1, is also good sign for those markets,” he added. – Bernama