KUALA LUMPUR: Foreign holdings in equities fell for the first time in five years in 2023, to 19.54 per cent, as they moved to other emerging markets which offer opportunities in terms of exposure to new economy and market depth.

The Securities Commission said in its Capital Market Stability Review 2023, the exchange rate will continue to influence the attractiveness of the domestic capital market.

In the report SC said, foreign investors have consistently made up approximately one-fifth of the Malaysian equity market since 2018. 

For the same period of analysis since 2018, it observed that the percentage dipped below 20 per cent for the first time in April 2023.

"Nevertheless, the five years average of foreign investors' composition ending 2023 was still at 21.41 per cent, above the 20 per cent threshold," said the report. 

The report highlighted that from 2018 to 2020, there were selling activities by foreign institutional investors, however this was supported by domestic institutional and retail investors. 

In terms of trading, it said from 2018 to 2023, foreign institutional investors made up the bulk of foreign trading while foreign retail investors trading were relatively muted.

"The Malaysian stock market includes strategic investors of both foreign and local origin, indirectly providing the equities market with an advantageous thick cushion in times of market distress due to the long-term strategic nature of this investors group," it said. 

The report said further analysis of the investors in Malaysia showed that the composition of foreign and local strategic investors has been increasing, while investors with active investment strategies were decreasing from 2018 to 2023.

It stated that the composition of local strategic investors increased by 0.76 percentage points from 83.99 per cent in 2018 to 84.75 per cent in 2023.  

The increase was mainly caused by their improved holdings in the information technology sector, which grew by RM26.76 billion in value over a span of five years, it said. 

Meanwhile, the report said the local active non-strategic investors decreased by 0.75 percentage points, while local passive non-strategic investors decreased by 0.01 percentage points from 2018 to 2023.

"In summary, the composition of local investors is comparatively more stable than the composition of foreign investors. 

"For instance, from 2018 to 2023, local investors declined by 2.42 percentage points by value, whereas foreign investors decreased by 16.50 percentage points," it added. 

https://www.nst.com.my/business/corporate/2024/03/1030247/foreign-holdings-equities-fell-below-20pc-mark-first-time-5-years