This article first appeared in The Edge Financial Daily, on January 12, 2016.

KUALA LUMPUR: Foreign funds sold equities listed on Bursa Malaysia amounting to RM613.7 million net, or equivalent to US$140.2 million last week, according to MIDF Research.

In his weekly fund flow report yesterday, MIDF Research head Zulkifli Hamzah said this was in line with the regional trend, but the attrition was not as intense as that seen during many weeks in 2015.

“The selling was not outright last week. Foreign funds were actually net buyers on Wednesday although the amount was marginal.

“Most of the selling was on Monday and Thursday, which were the days when the market in China collapsed,” he said.

Zulkifli said last Monday, the net amount sold was RM130 million, reversing six days of buying.

Last Thursday, the amount surged to RM295.2 million, the highest since Nov 13 last year.

He said the selling continued last Friday although the market generally rebounded.

“We note that on (last) Friday, foreign investors were also net sellers in Seoul, Taipei, Jakarta, Bangkok and Manila.

“Foreign participation rose last week but the amount remained in the moderate bracket at RM910 million. We believe many foreign players were still away from Bursa and are only gradually returning,” he said.

Zulkifli said what was rather striking from the statistics last week was the heavy local participation vis-a-vis that of foreigners.

He said that last Thursday in particular, the reaction to China’s second market meltdown emanated mainly from local investors.

He said the participation rate of local institutional funds hit RM2.5 billion on the day.

He said more striking was the participation rate of retail investors, which hit RM1.1 billion, the 19th time that the figure exceeded the RM1 billion mark since Jan 1.

“For the week, local players were heavy supporters of the market with retailers and local institutions mopping up RM53.8 million and RM559.9 million respectively,” he said.

Commenting on the regional markets, Zulkifli said it was a turbulent first week for global equity markets.

He said the extent of the decline in prices was among the worst on record for an opening week of the year.

“The culprit for the global rout in equity was unmistakably China. China’s benchmark CSI 300 index hit limit down twice, on Monday and Thursday,” he said.

Zulkifli said investors attributed the collapse to (i) the Caixin PMI report which showed China’s factory activity contracting for the 10th consecutive month, (ii) China central bank setting the yuan fixing rate at a low level leading the market to speculate on another exercise in devaluation, and (iii) the end of a moratorium on large shareholder selling.

He explained the contagion on the rest of the world was bad last Monday and Thursday.

However, the FBM KLCI showed a strong degree of resilience last  Thursday, outperforming other peers by declining only 0.8% on the day. This was despite Brent falling to as low as US$32.16 (RM 141.50) per barrel that day.

“As expected, there was a heavy tide out of Asian equities last week. However, the size of the outflow could have been worse and many investors were still away from the market and were caught on the sidelines by the severe decline in prices.

“Most of the attrition was recorded in Taiwan and South Korea, the economies which are highly exposed to China. The numbers were bad in Thailand too,” he added.