KUALA LUMPUR, March 22 (Bernama) -- Foreign investors continued to offload Malaysian equities last week, taking out a whopping RM1.53 billion from Monday to Thursday as compared with a RM1.43 billion outflow seen between March 9 and 12, as volatility persists.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said with the Chicago Board Options Exchange's Volatility Index (VIX) surging to a high of 85.47 points recently no thanks to COVID-19 jitters, the “fear gauge” has surpassed the level during the 2008 global financial crisis.
VIX is a gauge of stock markets’ expectation of volatility in the coming 30 days.
“The VIX hike signals that volatility in the global equity markets is likely to continue, where Bursa Malaysia cannot be spared from,” he told Bernama.
Despite the foreign funds outflow, Mohd Afzanizam said Bursa Malaysia was well supported by local institutions and local retail investors who remained as net buyers in the first four days last week, with net purchases recorded at RM1.29 billion and RM245.6 million respectively.
In the same period a week earlier, net inflows from local institutions and retailers stood at RM967.3 million and RM461.8 million respectively.
To cushion the impact of the turbulence in the markets, Mohd Afzanizam said the monetary authorities of major economies have been responding aggressively by cutting the benchmark interest rates to near zero.
“Quantitative easing in many countries has forcefully made a comeback to ward off the threats of a recession.
“That has spurred demand for safe-haven instruments such as US Treasury bonds, resulting in the slide of the benchmark 10-year Treasury yield to an all-time-low of below one per cent recently,” he added.
Mohd Afzanizam said global markets seem unconvinced by the aggressive easing measures and massive interest rate cuts implemented in major economies.
“Therefore, volatility is expected to persist, and flight-to-safety is likely to remain in the immediate term,” he said.
TAGS: Fund flow, foreign outflow, Bank Islam, volatility, VIX, Bursa Malaysia, equities, stock market, quantitative easing