RM3b foreign outflow from bond market in September


The foreign capital outflow from the Malaysian bond market continued for the second consecutive month in September to the tune of RM3 billion, exceeding RM2.4 billion in the preceding month, said RAM Rating Services Bhd.

Head of research Kristina Fong (picture) said external factors remained the key driver of this trend with the US Federal Reserve (Fed) lifting the Fed funds rate by 25 basis points to a range of 2% to 2.25%, the third hike this year.

The protracted US-China trade dispute continues to accentuate global risk aversion and a flight to safety, with September recording a new slew of retaliatory tariffs by both sides, she said in a statement.

On the domestic front, Fong expects Bank Negara Malaysia to maintain the Overnight Policy Rate in the foreseeable future as uncertainties still clouded domestic and external growth prospects amid continued global liquidity tightening and geopolitical concerns.

“The balance of growth and outflow pressures has placed the central bank between a rock and a hard place, as staying put remains the most optimal policy response,” she said.

Fong said both domestic and foreign investors would be watching for announcements following the tabling of the 11th Malaysia Plan midterm review and Budget 2019 on Oct 18 and Nov 2 respectively, for more concrete fiscal guidance on Malaysia’s debt and the fiscal deficit trajectory.

Domestic macroeconomic strengths are therefore not expected to entice any significant foreign capital inflows until more clarity emerges, she added.