Malaysian stocks to trend lower next few months

Malaysian stocks may be on a downtrend over the next few months, as foreign investors - fearing that world's central banks may trim stimulus programmes - take profit and began to exit the market, analysts said.

Bursa Malaysia data revealed that foreign funds were net sellers for the third consecutive week.

Between June 10 and June 14, foreign fund managers sold RM3.92 billion worth of shares while only bought RM2.24 billion worth of stocks. This makes them net seller of RM1.68 billion.

During the week, the benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBMKLCI) fell 0.75 per cent to 1,762.19 points.

The week also saw RM16.46 billion wiped out -- as the entire market capitalisation of the local bourse fell by 1.02 per cent to RM1.59 trillion.

"There is now an increasing expectation that the US Federal Reserve to tighten its asset-buying programme that has helped boost stock markets.

"I think the negative sentiment could go on for a few months and we expect the market to start rallying again sometime October," said Etiqa Insurance & Takaful head of research Chris Eng, who expects the FBMKLCI to hit 1,800 by year end.

Besides Malaysian stocks, major Asian markets, European markets and US market were not sparred.

The World Bank had recently lowered its growth forecast for the world economy to 2.2 per cent, against its earlier estimate of 2.4 per cent.

Meanwhile, investors will stay cautious ahead of the Fed's two-day policy board meeting that starts Tuesday.

During the two-day meeting, investors will look for clues on what would be Fed chairman Ben Bernanke's next move.

On Wednesday, the central bank will release updated US economic forecasts and Bernanke will hold a news conference.

"Even if the Fed didn't announce the tapering this round, it is only be a matter of time before the tightening starts.

"Therefore, we expect stock market to be volatile and choppy over the near-term," said another analyst when contacted.