Foreign capital inflows to bolster market – Rakuten

INVE$T | Market Sentiments

2 September 2022

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According to Kenny Yee, head of research at Rakuten Trade, the benchmark FBM KLCI is expected to be at the 1,600 to 1,650 level by year’s end due to increased foreign capital inflow and improved corporate results. The growth momentum is anticipated to continue into the following year, with the barometer index likely to be more stable than it was this year. The net inflow of foreign funds has already reached RM8bil following the introduction of Rakuten Trade’s currency facility here. It is a plus point since volatility is still low in Malaysia compared to the region. Next year will be even smoother with much better corporate earnings. For this year, even though there was still uncertainty in the market, coupled with the implementation of the prosperity tax (Cukai Makmur), the corporates had managed to record good earnings growth. Saying to watch out for next year as it’s going to be much better as the inflationary pressure is still not as bad as in the developed countries. Over the short term, the Ringgit is still on the weak side. However, it is only weakening against the US dollar, whereas against the region’s currencies it is strengthening. However once the US Federal Reserve has eased its quantitative tightening, then the Ringgit may rebound. 

Tech stocks are currently “sexy” but his personal preference is banking stocks, real estate investment trusts and telco counters. The healthcare sector, especially rubber glove companies, still has a lot of uncertainty adding that fundamentally, things are still not that positive.  

Meanwhile, the brokerage has launched its enhanced foreign market service that includes the benefits of a FX facility. Investors can now convert funds between the ringgit and the US dollar via its app and web platform. Conversions are made in real-time, at competitive rates and with no additional FX charges imposed on inter-currency trades. With the rollout, investors can now trade in either the ringgit or the US dollar at low brokerage rates of RM7 to RM100 or US$1.88 to US$25, respectively.  

According to Rakuten CEO Kazumasa Mise, almost 25,000 US trading accounts have been activated through Rakuten Trade since the service was first introduced in January and it has also served as a catalyst for new investors to test trading strategies on Bursa Malaysia before diversifying onto the US markets. To date, more than 85% of Rakuten Trade’s clients trade first on Bursa Malaysia before going into US markets. The brokerage continues to record strong and steady trading growth on the New York Stock Exchange and Nasdaq. 

Foreign fund inflows continued for sixth consecutive week – MIDF Research 

According to MIDF Research, Bursa Malaysia continued to see foreign fund inflows for the sixth consecutive week for the week ended Aug 26, although at a much more moderated pace, with an inflow of RM355.1 million compared with the net inflow of RM615.5 million in the previous week. Malaysia was among five Asian exchanges which were in the positive region last week. Strong inflows were seen in South Korea (US$463.7 million), India (US$405.8 million), Thailand (US$259.5 million) and Indonesia (US$119.5 million).  

In its weekly Fund Flow Report, the research house that said foreigners were net buyers on every trading day last week except on Wednesday, where they disposed of RM90.5 million worth of equities, while local institutions remain as net sellers. Foreign investors were net buyers on Monday (RM56.2 million) and Tuesday (RM14.2 million), and on Thursday (RM193 million) and Friday (RM71.7 million), respectively. However, local institutions remained net sellers for the seventh consecutive week at RM286.2 million. They have been net sellers for every trading day since Aug 3 before briefly turning into net buyers on Wednesday (Aug 24) at RM24.3 million. They were net sellers on Monday (RM92.4 million), Tuesday (RM40.4 million), Thursday (RM114.3 million) and Friday (RM63.5 million). Meanwhile, local retailers maintained their net buying spree for the third consecutive week at RM41.7 million. They bought RM128.6 million net from Monday to Wednesday before net selling RM87 million over the next two days.  

To date, international funds have been net buyers in Bursa Malaysia for 23 out of the 34 weeks of 2022, with a total net inflow of RM7.97 billion. Local retailers have been net buyers for 22 out of 34 weeks of 2022 at RM1.8 billion year-to-date. On the other hand, local institutions were net sellers for 27 out of 34 weeks, with a total net outflow of RM9.76 billion. In terms of participation, there has been a decline in average daily trade value (ADTV) across the board, led by local institutions (-8.9 per cent), retailers (-2.97 per cent) and foreign investors (0.9 per cent). 

Eye On The Markets 

This week, on Friday (2Sept), the Ringgit opened at 4.4845 against the USD from 4.4740 on Monday (29Aug). Meanwhile, the Ringgit was 3.2001 to the Sing Dollar on Friday (2Sept). On Monday (29Aug), the FBM KLCI opened at 1486.52. As at Friday (2Sept) 10:00am, the FBM KLCI is up 3.82 points for the week at 1490.34. Over in US, the overnight Dow Jones Industrial Average closed up 145.99 points (+0.46%) to 31,656.42 whilst the NASDAQ shed 31.08 (-0.26%) to 11,785.13. 

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