KUALA LUMPUR: Malaysia's equity market experienced foreign outflows in the first half of 2023 due to the US Federal Reserve's monetary policy tightening, according to the Securities Commission's (SC) Capital Market Stability Review 2023.

 However, the report said stock indices gradually improved, concluding 2023 in recovery mode, primarily driven by a more stable market sentiment partly fuelled by the potential peak in interest rate cycles set by global central banks.

 "Domestic factors, including the resilience of the Malaysian economy, ongoing strategic initiatives, and promising foreign direct investment inflows, also played a role in shoring up investors' confidence," said the report.

 While the FBM KLCI recorded a yearly decline of 2.73 per cent to close at 1,454.66 points on December 29, 2023, the report said FBM Small Cap soared and recorded a gain of 9.57 per cent as investors shifted their buying interest to small-cap stocks.

 The average daily trading volume and value increased to 3.55 billion units (2022: 3.00 billion units) and RM2.29 billion (2022: RM2.18 billion) respectively, it said. 

 In 2023, the global equity market was predominantly influenced by multiple interest rate hikes by the Fed in response to the persistent inflation in the US.

 The heightened uncertainties were further compounded by a banking crisis in developed markets in March 2023, including the failure of Silicon Valley Bank (SVB) and Signature Bank. 

 Despite the various external factors, the report said according to Bloomberg's Composite Valuation Score, Malaysia ranked higher in comparison to most tracked emerging markets driven by the expectation of improved general macroeconomic growth.

 "This includes robust gross domestic product growth, a firmer ringgit, and higher foreign direct investments. Essential market risk management mechanisms were in place to manage excessive market volatility. There was no circuit breaker triggered in 2023," it added.

https://www.nst.com.my/business/corporate/2024/03/1030091/foreign-outflows-malaysias-equity-market-due-feds-policy