Foreign Funds Flowing Strongly Back to Malaysia

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Foreign funds are flowing strongly back to Malaysia, indicating that investors have shaken off the panic triggered by the historic change of government in 2018, reports The Straits Times.

Last year’s RM19.9 billion net take-up outweighs the RM11 billion in foreign money that left the stock market, and nearly wipes out the RM21.9 billion outflow for the whole of 2018.

The increase, the biggest since 2012, has been lauded as a positive sign of market reforms initiated by the Pakatan Harapan administration.

The foreign sell-off of Malaysian shares, meanwhile, narrowed slightly to RM11 billion last year from RM11.7 billion in 2018.

Socio Economic Research Centre executive director Lee Heng Guie said the return of foreign funds into government bonds especially in the second half of 2019 showed that PH is “continuing to reform public finance and control its debt”.

He said, on the other hand, the Kuala Lumpur bourse has been hit, as “people are still trying to navigate…negative surprises in terms of new policies or regulations”, citing price reductions in telecommunications and a revamp of the power-producing sector as among the measures that have hurt blue-chip counters.

Oh Ei Sun, senior fellow at the Singapore Institute of International Affairs, said investors are still on a “learning curve” following the elections, which saw Barisan Nasional losing power after six decades at the country’s helm.

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“The old regime’s long-running cronyism is no longer the mainstay of the economy, and there is a need to understand the new, more open and fair realities to discover value in the market.” 

Risk consultancy Eurasia Group’s Asia director, Peter Mumford, is cautious, saying the market will continue to be jittery so long as doubts remain over the handover of power from Prime Minister Dr Mahathir Mohamad to PKR president Anwar Ibrahim.

“While Dr Mahathir’s position is secure in the near term, there remains considerable uncertainty over when exactly, and to whom, he will hand over power.

“This creates an underlying level of uncertainty for investors.”

Foreign investors in 2018 fled Malaysia over fears of an unstable new government. The second quarter of that year alone saw the pull-out of RM24 billion and RM9 billion from debt papers and equities, respectively. – TMI