KUALA LUMPUR: Foreign investors sold net RM285.4mil of Malaysian shares in open market in week ended Aug 8, says MIDF Equities Research and its expects a challenging week ahead.

It said on Monday foreign investors exited stocks listed on Bursa Malaysia for the third consecutive week.

"Foreign investors offloaded -RM285.4mil net in the open market last week. In the preceding week, the outflow amounted to -RM165mil," it said.

MIDF Research said the foreign selldown has been noticeable, but not significant enough to be disconcerting, after the MH17 tragedy on July 18. Between July 18 and Aug 8, foreign investors had sold -RM885.2mil net," it said.

The research house said investors should expect a challenging week ahead after the FBM KLCI broke its long-term support while the FBM70 fell below its short-term support on Friday.

"We expect institutional support to emerge, as has been the case whenever the KLCI hit its long-term support," it said.

To recap, it said foreign money flow was positive on Monday and Tuesday. However, foreign funds turned net sellers in the remaining three trading days of the week, as geopolitical concerns heightened.

On cumulative basis, foreign investors remained net sellers of Malaysian stocks in 2014. However, foreign money pullout since Juyl 18 means that the net outflow as of last Friday had increased to -RM2.23bil. In 2013, Malaysia reported a net inflow of +RM3.0bil," it said.

MIDF Research saidn foreign participation, as measured by the average daily foreign gross purchase and sale on Bursa, fell significantly to RM830mil, from RM1.250bil during the three-trading day Hari Raya Aidil Fitri week.

"As long as participation rate remained low or moderate (below RM1bil), we believe there is ample domestic liquidity to support the market.

"The retail market remained cautious. Retail investors offloaded -RM76mil last week, and had been selling for 17 consecutive weeks. However, we note that participation rate surged to RM1.15bil, the second highest this year. This implies aggressive absorption by the retailers during the selldown last week.

"Local institutions supported the market passively last week. For the week, local funds mopped up only +RM322.9mil net. Participation rate was elevated at RM2.58bil, the highest in 10 weeks," it said.