Foreign funds pull $474m out of Malaysia in October
Foreign funds pull $474m out of Malaysia in October
KUALA LUMPUR (Reuters): Foreign funds withdrew nearly half a billion dollars from Malaysia in October, registering rising disenchantment with the slow pace of corporate restructuring.
Latest data posted by the National Economic Action Council (NEAC) on its website (www.neac.gov.my) showed that net foreign portfolio outflow totaled 1.8 billion ringgit ($474 million) between October 4 and November 1.
Foreign funds have withdrawn $1.3 billion from Malaysia since NEAC started keeping score in February, 1999.
A good part of the exodus in October was attributed to funds anticipating Morgan Stanley Capital International (MSCI) would re-jig its global investment index to Malaysia's disadvantage.
The re-jig, when it came earlier this month, resulted in Malaysia's weighting dropping to between 4.5 and 6.0 percent from 10 percent in an index used by fund managers as a guide for allocating funds in different markets.
"Basically it is due to MSCI and it has also to do with corporate governance," said Chong Sui San, chief investment officer at Malaysia British Assurance Bhd.
"Foreign funds are not very comfortable with Malaysia," she said, adding sentiment was likely to remain bearish.
The bellwether Kuala Lumpur Stock Exchange Composite Index has had a bumpy ride this year.
At the close on Tuesday the share index stood at 710.86 points, down 30.4 percent from the year-high of 1,021.20 on February 18 and 12.5 percent lower than the end-1999 level of 812.33 points.
Fund managers said portfolio funds are unlikely to rush back into Malaysia unless the government ushers in more transparency in corporate restructuring.
"Most of the promises made by the large corporates are not kept," said a local fund manager.
She cited a recent deal between the country's largest industrial conglomerate, Renong Bhd, and its associate, United Engineers, to restructure assets and debt, as the kind of example of corporate governance that put investors off.
"Prices of many bluechips are very cheap and look attractive but unless there is transparency and improved corporate governance, funds will not be in a hurry to return," the fund manager said.