By NG MIN SHEN / Pic By TMR File
FOREIGN investors pulled capital from the country’s financial markets in October, with Bank Negara Malaysia (BNM) attributing non-resident portfolio outflows were mainly due to external developments.
In its monthly highlight statement for October 2018, the central bank said the ringgit depreciated by 1% during the month under review amid sustained US dollar strength and non-resident portfolio outflows, after having declined 0.8% in September.
“Positive sentiments on the US dollar were driven mainly by releases of positive US economic data and signalling by the US Federal Reserve on further planned interest-rate increases,” it said.
The FTSE Bursa Malaysia KLCI plunged 4.7% in October compared to a 1.5% drop recorded in September.
“Sentiments were affected by the sharp sell-offs in US equities following profit taking ahead of US earnings announcements and concerns over tighter financing conditions in the corporate sector, as reflected by the higher US Treasury yields,” BNM said.
Five-year Malaysian government securities yield remained stable, increasing by 4.1 basis points during the month versus a 5.7% hike in September.
Headline inflation rose to 0.6% in October against a 0.3% increase in September this year, due to higher food and transport inflation.
“The higher food inflation mainly ref lected higher prices of fresh vegetables, while the higher transport inflation reflected the base effect in the RON95 petrol price and higher RON97 petrol price during the month,” it said.
Excluding the impact of the changes in the consumption tax policy, core inflation remained broadly stable at 1.5% in October, versus 1.4% in September.
The overall industrial production index climbed 2.3% in September after a 2.2% increase in August, amid stronger growth in the manufacturing and electricity subsectors.
Mining output recorded a sharper contraction due to weakness in the production of both crude petroleum and natural gas.
The manufacturing sector, which grew 4.8% in September following a 4.3% expansion in August, was mainly underpinned by stronger performance in the production of electrical and electronic (E&E) goods.
Net financing, namely outstanding loans of the banking system and outstanding corporate bonds, grew 7.1% in October versus 7% in September, helped by higher growth in outstanding banking system loans of 6% against 5.7% in September.
Total business loan growth was stronger at 5.6% in October compared to 4.5% in September, on account of higher growth of loans to non-small and medium enterprises of 10.5% versus 7% in September.
The growth of net outstanding issuances of corporate bonds was at 10.2% in October, compared to 10.8% in September.
Household loan growth dipped slightly to 5.9% in October this year, after registering 6% in September.
Banks’ loan-to-fund ratio stood at 83.3%, while the loanto- equity ratio was at 72.7%.
Banks maintained sufficient liquidity with a liquidity coverage ratio (LCR) of 147% with all banks recording LCR levels above 100%.
Meanwhile, BNM said Malaysia’s international reserves remain usable, with the central bank’s official reserve assets recording US$101.7 billion (RM425.1 billion) as at end-October 2018, while other foreign currency assets stood at US$52.3 million.
According to the monetary authority, the pre-determined short-term outflows of foreign currency loans, securities and deposits — which include scheduled repayment of external borrowings by the government and repayment of maturity proceeds from the foreign currency Bank Negara Interbank Bills — would amount to US$1.47 billion for the next 12 months.
Short forward positions stood at US$22.79 billion as at end-October 2018, reflecting the management of ringgit liquidity in the money market.