• Foreign investors locked in profit ahead of a slow month expected in March till April

• Investors were also pushed to the sideline ahead of US important policy meeting in March

• Ringgit rebounded but will this trend sustain?

Foreign investors selling pressure in recent week was so intense as it took them just a week to wipe out RM1.5bn where it took almost two months to accumulate the same number. Total YTD foreign investors tally tanked to a mere RM288mn and it could turn even lower in the coming month as by historical trend, fasting month, has always been the most challenging in the year. The same is expected to continue though we hope 2024 will buck the historical trend. Now, what has caused foreign investors to ditch our market after performing so well since the start of the year. First suspect is them taking profit ahead of the slowest month in the year, as mentioned (i.e., Ramadhan). Might as well lock in the profit and to enter back later whilst the market is hot. Secondly, investors could be waiting in bated breath of Malaysia 2024 growth prospects which will come into light on 20th of March when BNM releases its 2023 Annual Report. Will there be positive surprises or will there be downside risk amid the government that remains firm to rationalize subsidy. This plan will indeed hurt private consumption, our biggest engine of growth and this is a concern. Will we succumb to moderation in growth consistent with China amid our trade and economic coupling with the country? All these are weighing on investors mind. Thirdly, is the elephant in the room amid the US policy direction that remains uncertain. This week will be an important week following US FOMC that will release its February CPI numbers (12th March). The outcome will determine the prospect of rate cut whether in 3Q or 4Q. Of note, street consensus is expecting US CPI to remain unchanged at 3.1% though a slight acceleration in core CPI to 3.7% from 3.9% previously. That is hardly comforting though US February unemployment rate has improved to 3.9% against 3.7% previously. This will be further weighed by the strong US labour market amid its job openings that remained solid at 8.6mn in January. For comparison, the average US job opening prior to COVID-19 was at circa 5.0mn. Given the writing on the wall, it is not surprising that investors turned jittery unless and until all the signs are clear that the US central bank will be at ease to cut rate by 3Q. In a nutshell, we expect sentiment to remain cautious until the release of US February CPI numbers on Tuesday. This, will in turn, determine, the sentiment right until the release of US March policy decision, schedule on 20th of March. Coincidently, BNM will also release its 2023 Annual Report on the same day. Given successive important development as aforementioned, we are not surprised that foreign investors decided to trim their holding in Bursa Malaysia. When will they return? Perhaps at the tail end of fasting month, and therefore, early April. This remains conjecture, however, as various factors could push their return earlier-thanexpected. This may include upside risks to Malaysia growth potential or US February CPI that could slip better-than-expected. Until then, we expect sentiment market to remain cautious with a moderate risk appetite.
 

Source: BIMB Securities Research - 11 Mar 2024