KUALA LUMPUR: Foreign investors returned to Malaysian equities in July with RM300.9 million in net inflows, ending two consecutive months of selling.
Buying interest centred on financial services, transportation and logistics, and utilities sectors, according to MBSB Research's latest weekly fund flow report.
Financial services attracted the largest foreign inflows at RM1.11 billion, followed by transportation and logistics at RM367.2 million and utilities at RM305.6 million,
MBSB Research head of research Imran Yassin Yusof said the trading activity suggested investors were favouring sectors with clearer earnings visibility and more defensive characteristics amid a mixed economic outlook.
"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," he said in a statement.
The return of foreign buying was selective, with industrial products and services recording RM759.7 million in net outflows, while technology saw RM484.9 million in foreign selling. Consumer products and services also registered RM212.8 million in outflows.
The buying momentum continued into the final week of July, with foreign institutions recording RM11.1 million in net purchases.
Transportation and logistics led weekly inflows with RM107.4 million, followed by financial services at RM216.5 million and healthcare at RM148 million.
The July inflows came against a mixed economic backdrop, with Malaysia's producer price inflation accelerating to 9.2 per cent year-on-year in June, the strongest annual increase since June 2022, driven largely by supply chain disruptions linked to the Middle East conflict.
Meanwhile, Malaysia's Leading Index declined 0.5 per cent month-on-month in May, with annual growth moderating to 0.8 per cent, pointing to a softer near-term economic outlook, MBSB Research said.
Global monetary conditions also remained uncertain, with the United States Federal Reserve, Bank of England and Bank of Japan keeping their policy rates unchanged in July, although some policymakers continued to flag inflation risks.
Regionally, foreign investors remained cautious, recording US$1.19 billion in net outflows across eight Asian markets tracked by MBSB Research for the sixth consecutive week.
Malaysia was among the markets that attracted foreign inflows, alongside India, South Korea, Indonesia, Thailand and the Philippines.
MBSB Research said the renewed interest in transportation and logistics, and utilities reflected investor preference for industries linked to trade, mobility, energy and industrial development.
The report noted that while sector classifications do not directly correspond to individual financing programmes, the flow patterns provided an indication of areas where foreign investors were finding relative confidence within the Malaysian market.
MBSB Research said the return of foreign buying was encouraging but should be monitored over a longer period before being viewed as a sustained reversal.
"The July data suggest that foreign investors are again examining selected areas of the Malaysian market.
"Whether that interest develops into a more durable trend will depend on earnings delivery, economic conditions and the ability of strategic industries to convert capital interest into productive investment and business growth," it said.