Foreign investors returned to Malaysian equities in July after two consecutive months of net selling, although the latest fund flows suggest they are becoming more selective about where they put their money.
Foreign institutions recorded RM300.9 million in net inflows on Bursa Malaysia during the month, with Financial Services drawing the largest inflows at RM1.11 billion. Transportation and Logistics followed with RM367.2 million while Utilities attracted RM305.6 million.
The buying was not broad based, however, with Industrial Products and Services recording RM759.7 million in net foreign outflows, followed by Technology at RM484.9 million and Consumer Products and Services at RM212.8 million.
MBSB Research Head of Research Imran Yassin Yusof said the composition of the flows was more telling than the overall figure, with investors appearing to favour sectors with clearer earnings visibility, stronger domestic relevance and more defensive characteristics.
“The return of foreign buying is a constructive signal, but the composition of the flows is more telling than the headline figure. Inflows were concentrated in Financial Services, Transportation and Logistics, and Utilities, while Technology and Industrial Products and Services continued to see selling.
“In our view, this reflects a more selective allocation of capital towards sectors offering clearer earnings visibility, stronger domestic relevance and more defensive characteristics. Even so, one month of inflows does not establish a durable trend. Elevated producer prices, softer leading indicators and uncertainty over global interest rates could continue to shape investor appetite in the coming months.”
The buying momentum continued into the final week of July, when foreign institutions recorded RM11.1 million in net buying. Transportation and Logistics received RM107.4 million in inflows, while Financial Services and Healthcare attracted RM216.5 million and RM148 million respectively.
The flows came against a mixed domestic backdrop. Malaysia’s producer price inflation accelerated 9.2% year on year in June, its strongest annual increase since June 2022, while the Leading Index fell 0.5% month on month in May and annual growth moderated to 0.8%.
Global monetary policy also remains a consideration, with the US Federal Reserve, Bank of England and Bank of Japan keeping interest rates unchanged in July, although dissenting policymakers at each central bank favoured tighter policy.
Across the eight Asian markets tracked by MBSB Research, foreign investors were net sellers for a sixth consecutive week, recording USD1.19 billion in outflows. Malaysia was among the markets that still attracted foreign funds alongside India, South Korea, Indonesia, Thailand and the Philippines.
MBSB Research said the renewed interest in Transportation and Logistics and Utilities could point to greater investor confidence in industries tied to trade, mobility, energy and industrial development.
However, the research house cautioned that July’s inflows should not yet be viewed as a sustained reversal, with future investor appetite likely to depend on earnings delivery, economic conditions and how effectively strategic industries turn capital interest into productive investment and business growth.
