KUALA LUMPUR (Aug 7): The capital market flow and investors sentiment are expected to remain stable as the country heads towards the six state elections this Saturday (Aug 12).
Securities Commission Malaysia (SC) chairman Datuk Seri Dr Awang Adek Hussin said the domestic capital market registered positive net inflow in the last few weeks, which indicates that a post-election selloff is unlikely in the future.
“There should not be any capital outflow. In fact we are seeing some improvement in the capital market. Everybody knows that elections are only a temporary thing, and I do not think there will be any adverse effect on the capital flows or the performance of the market.
“The federal government is steady and intact. This is only the state election and not a parliamentary election. We at SC will continue to do our work,” Awang Adek said at the sidelines of the InvestED Leadership Programme on Monday.
RHB Research in a note on Monday said it expects net capital outflows from the domestic equity market from the second half of August onwards on a sustained basis.
“Historically, from the empirical evidence we notice net capital inflows into the domestic equity market as domestic elections approached and subsequently as elections culminate, these capital inflows reverse course,” said RHB Research group chief economist and head of market research Dr Sailesh K Jha.
He said a similar relationship is observed between the USD-MYR and elections, adding the historical relationships will hold as the country heads out of the Aug 12 state level elections.
“The second catalyst is as US treasury yield (UST10YR) bond yields rise to around 4.4% in the next few months, we are likely to observe net capital outflows from emerging market (EM) equity markets, e.g. broad EM weakness,” he added.
Foreign investors continued their net buying streak on Bursa Malaysia for the fourth consecutive week last week, although at a more moderate rate of RM130.5 million, according to MIDF's weekly flow report released on Monday.
The InvestED programme was launched by Prime Minister Datuk Seri Anwar Ibrahim on June 19 as an initiative aimed at enhancing graduate employability and ensuring a sustainable talent pipeline to help ease the shortage of skilled talent in the capital market.