Thursday 28 Mar 2024
By
main news image

KUALA LUMPUR (Aug 8): Following three straight months of net selling, foreigners bought a net RM4 billion worth of Malaysian bonds in July, according to UOB Malaysia.

This narrows foreign selling, on a cumulative basis, to RM16.9 billion from the January to July period, according to UOB senior economist Julia Goh in a note today.

Goh said the bulk of the flows in July entered Malaysian Government Securities (RM3.5 billion), as well as Bank Negara Malaysia (BNM) notes (1 billion), with the remainder going into Government Treasury Bills (0.1 billion).

“Meanwhile, foreigners sold Government Investment Issues (0.3 billion) and private debt securities (0.3 billion). Foreign holdings of government bonds edged up RM3.2 billion to RM168 billion or 23.8% of total outstanding. Foreign holdings of Malaysian Government Securities (MGS) rose to RM154 billion or 40.5% of total outstanding,” she said.

Goh also noted that foreigners have continued to pare down equities albeit at a slower pace of RM1.7 billion in July, compared with RM4.9 billion in June and RM5.6 billion in May.

“Foreign holdings of equities have edged down from a high of 24.2% in March to 23.5% in July. Foreigners have sold a cumulative RM8.5 billion of domestic equities in the Jan to July [period].

“The selloffs were offset by local institutions, who bought RM9.9 billion worth of stocks year-to-date. The trend reversal in Malaysia’s portfolio flows is in sync with a modest July rebound in emerging market portfolio flows. Over two-thirds of the net inflows (US$7.9 billion) entered equities, with China attracting the bulk of the flows. Portfolio debt flows amounted to US$4 billion,” she said.

She also noted that BNM's international reserves fell by US$0.2 billion from June 29 to US$104.5 billion as at end-July. It was the smallest pace of month-on-month decline since May; it retreated US$1 billion from US$109.5 billion in end-April to US$108.5 billion as at end-May, before falling US$3.8 billion to US$104.7 billion as at end-June.

“However, BNM’s short position in FX swaps widened to US$16.2 billion in June or 15.5% of total foreign reserves. It remains below its peak of US$19.1billion or 19.9% in April 2017,” said Goh.

Goh added that the reversal in foreign portfolio flows helps to ease the pressure on foreign reserves and the ringgit.

“However, we remain cautious as the surge in volatility in emerging markets continues to be a consistent theme this year. The prevailing strong US dollar backdrop amidst rising US-China trade tension puts the ringgit on renewed risk of weakness alongside other Asian FX.

“Therefore, we continue to anticipate mild weakness in the ringgit going forward and forecast USD/RM higher at 4.08 by end-2018 and 4.12 by mid-2019,” she said.

      Print
      Text Size
      Share