Foreign funds flowing out fast: research firm
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(KUALA LUMPUR) Foreign investors are moving their money out of Malaysia at an alarming rate due to domestic political uncertainties and record inflation rate, a local research firm said, local media reported yesterday.
'Funds are exiting the country at a worrying rate. In the first half of 2008, a total of RM125 billion (S$51.95 billion) in funds was withdrawn from Malaysian shores. This first half 2008 outflow has already exceeded the total outflows of RM92.3 billion for the whole of last year,' HLeBroking Research wrote in its Traders' Brief to its retail customers on Monday.
'All in all, fund outflows are increasing drastically, while fund inflows are decreasing drastically from last year,' the New Straits Times quoted it as saying.
The effects of the outflow of funds can be seen from the selling out of Malaysian bonds and the ringgit, the research firm said.
'As a result of plunging bond prices, bond yields for the three-year Malaysian Government Securities is now at the alarming 4.18 level.
'Essentially, the loss of faith of foreign investors has increased the cost of funds for Malaysia in general, making it hard for people to raise funds to finance economic activities,' it added.
One factor causing international investors to withdraw their funds from the country was the political uncertainty, HLeBroking Research said.
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'The Kuala Lumpur Composite Index (KLCI) was sold down, with drastic changes in foreign shareholdings, while prices of bonds begin depreciating sharply, increasing yield and, at the same time, the country's cost of raising new funds,' it said.
The country's inflation also rose to a 26-year high of 8.5 per cent in July, following the fuel price hike a month earlier. - Xinhua
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