KUALA LUMPUR: Foreign investors are set to turn net buyers of Malaysian equities this week with larger funds, if the sitting government returns to power, said analysts.
If the possible scenario of post-GE14 is similar to that of the last election, the analysts said, inflows could accelerate to RM1 billion level on Thursday, which would be the highest level of foreign fund inflows since General Election 13 (GE13).
Foreign investors bought RM1.43 billion worth of local equities on that day, May 6, 2013.
Foreign portfolio funds have been flooding into Malaysia since the beginning of the year, making Malaysia one of only two countries with inflows year-to-date, among Asean countries tracked by Bloomberg.
The other country is Vietnam with RM2 billion year-to-date net inflows, RM1 billion lower than inflows into Malaysia.
Market expert Nazarry Rosli said pre-election appears to be creating an above-average amount of uncertainty, which has pushed away foreign investors.
“Due to uncertainty, foreign investors take a wait-and-see approach. Once there is certainty in the market, for example, in this case with the victory of Barisan Nasional, they would return to the local equities. That time, they would return with larger funds,” he told NSTP Business.
MIDF Research said the FTSE Bursa Malaysia KLCI will probably stage a relief rally on Thursday after GE14 reflected by an influx of foreign inflows, assuming the federal ruling incumbent retains its position.
In the penultimate week before the 14th General Election (GE14), the research house said global investors turned net sellers of Malaysian equities for the first time in four weeks, in line with other Asian markets.
The net amount withdrawn by foreign investors last week amounted to RM438.4 million, the second highest weekly outflow so far this year, it added.
“As a result, the year-to-date inflow stands at RM3.02 billion net, making Malaysia the only market with inflows among the four Asean markets we track so far in 2018.”
MIDF Research only tracks Malaysia, Thailand, Indonesia and the Philippines in the Asean market.
MIDF Research said international investors continued to flee Asian markets for the seventh week running albeit at a measured pace.
“Based on the provisional aggregate data for the seven Asian exchanges that we track, investors classified as foreign offloaded US$1.64 billion net last week.”