Foreign fund inflow is expected to improve in coming weeks as evidenced by the inflow of RM123.3 million on Thursday, the highest since November 8.

Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said the heavy inflow also helped to pare down the week’s net foreign outflow to RM181.1 million as of Thursday.

Saying that this could be an indication that foreign funds were looking at Malaysia more positively, he added that the country’s consistent current account surplus aided the strong sentiment.

“They realise that Malaysia is one of the few emerging markets that has consistently recorded a current account surplus. 

"In the last 20 years, we have not recorded any current account deficit, meaning that we are living well within our means, we are not overspending and not over-importing,” he told Bernama.

Pong also said foreign investors were also not affected by the recent developments surrounding Lembaga Tabung Haji, and were not reducing its exposure in the equity market.

However, he said Tabung Haji's intention to sell its stakes, especially in small capitalisation counters would have a big impact on the local equity market and affect sentiment among local investors.

“Given the size of their funds, it could be even as much as RM10 billion worth of shares that will be sold in the market,” he said.

Pong said due to the cautious internal and external sentiment, window dressing activities are only expected to commence later this month.

“I dare not say that any local funds-led window dressing has commenced because there is no consistent evidence of a rise in FBM KLCI but instead, on days when the overall global market was weak, the index dropped,” he said.

Tabung Haji recently announced that it intended to restructure its portfolio and reduce its assets in the stock market to 20 percent of its portfolio from about 50 percent at present.

The pilgrimage fund board also said that they are especially conscious of their holding of small cap stocks and wanted to focus on dividend-yield stocks.

Going forward, Pong said the market would be closely monitoring developments on the US-China trade war.

“The market has been reacting, on a daily basis, to any announcement relating to the trade war,” he said, adding that the outcome of the US Federal Open Market Committee meeting, scheduled for De 18 and 19, is being keenly awaited to gauge the US central bank’s monetary policy.

“If the US Federal Reserve raises rates or indicates its intention to do so, the US dollar will strengthen,” he said.

Pong also said the meeting could also provide some indicators on the US Federal Reserve’s next move for 2019.

“Generally, the market expects interest rates to continue increasing next year,” he added.

- Bernama