Malaysian banks and corporates bought more overseas assets in 2020

Malaysian banks and corporates bought more overseas assets in 2020
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KUALA LUMPUR (March 31): Malaysia’s external assets increased by RM139.6 billion in 2020, largely in the form of portfolios and direct investments by banks and corporates, said Bank Negara Malaysia (BNM).

In its 2020 Economic Monitor Report, BNM said this helped the country’s international investment position (IIP) turn around to register a net asset position of RM79.6 billion or 5.6% of gross domestic product (GDP) at the end of 2020 — from a net liabilities position of RM44.1 billion or -2.9% of GDP in 2019.

This was the first time Malaysia recorded an external asset position since 2016, when it reported an external asset position of RM70.2 billion or 5.6% of GDP.

As for external liabilities, BNM said they increased by RM15.9 billion. This smaller increase in external liabilities reflected the net repayment of interbank borrowings, lower non-resident deposits and lower market revaluations of equity securities held by non-residents during the year due mainly to the adverse impact of the Covid-19 pandemic on equity prices.

The central bank said the currency composition of Malaysia’s IIP remained favourable in 2020. The net foreign currency (FCY) external asset position — external assets denominated in FCY minus FCY external liabilities — increased to RM1.1 trillion or 75.1% of GDP from RM930 billion or 61.5% of GDP in 2019.

“Hence, periods of ringgit exchange rate depreciation will result in a larger increase in external assets compared to external liabilities, thus enhancing Malaysia’s external position,” it said.

Banks and corporates registered a net external asset position, which was primarily supported by their large net FCY assets. BNM noted that these entities also held sizeable liquid external assets amounting to RM770.9 billion, up from RM617.8 billion in 2019, which can be drawn upon immediately to meet their external debt obligations.

A country’s IIP reflects the value of its external assets versus its external liabilities. When the country is in an external asset position, it means that the value of its external assets exceeds its external liabilities.

Read more stories from the BNM Annual Report 2020 here.

S Kanagaraju