KUALA LUMPUR (Oct 21): Foreign buying of Malaysian Government Securities (MGS) and Government Investment Issues (GII) continued for the fifth consecutive month in September, rising by RM1.1 billion.

According to RAM Rating Services Bhd, this was driven by investors hunting for yields and the higher weightage accorded to MGS and GII in the JP Morgan Government Bond Index – Emerging Market (GBI-EM) index.

It noted that the keen foreign interest was also robust relative to other emerging market peers such as Indonesia and Thailand.

On a year-to-date basis, total net foreign inflow into MGS and GII stood at US$1 billion, versus the US$12.9 billion outflow seen in Indonesia and US$2.2 billion outflow in Thailand.

“While favourable yield differential would continue to spur interest, the pace may soften in the months ahead. Key risks on the horizon include the resurgence in Covid-19 cases in Malaysia, the perceived power tussles over control of the federal government, the November US presidential election and the uncertainties surrounding Brexit, which could diminish foreign inflows.

“Meanwhile, domestic bond yields are likely to stay suppressed amid abundant global liquidity and low interest rates. Another OPR cut by Bank Negara Malaysia in November, the likelihood of which has been thrust back into the spotlight amid the resumption of the conditional movement control order in key urban areas, may also keep a lid on yields going forward,” RAM noted.