By NG MIN SHEN / Pic By TMR

Foreign fund flow into Malaysia turned around in the first quarter of 2019 (1Q19) with overall inflows of RM3.8 billion versus outflows of RM2.8 billion in 4Q18.

United Overseas Bank (M) Bhd senior economist Julia Goh said the overall foreign flow improvement was mainly lifted by bond inflows of RM5.1 billion, which offset equity outflows of RM1.3 billion.

Foreign holdings of Malaysian government bonds — Malaysian Government Securities (MGS) and Government Investment Issues (GII) — stood at RM169 billion or 22.8% of the total outstanding as at end-March 2019, versus RM167 billion or 22.7% in February.

“Some positive catalysts for emerging markets include the dovish shift from the US Federal Reserve and more constructive talks between China and the US. However, Asian currencies continue to drift sideways against the US dollar amid the bearish global outlook,” Goh said in a research note yesterday.

Foreign investors bought RM2.9 billion of Malaysian debt securities in March this year, lower than RM4.5 billion in February.

“This marks the second month of net buying which brings cumulative flows to RM5.1 billion in 1Q19. The latest quarterly inflow is a sharp improvement from RM400 million in 4Q18 and net selling of RM25.6 billion in 2Q18 and 3Q18,” she said.

Last month, foreigners bought RM1.4 billion worth of MGS and RM1.3 billion of GII, compared to RM4.9 billion worth of MGS sold and RM800 million worth of GII bought in February.

Foreigners also bought RM300 million of Treasury bills in March, down from RM800 million during the preceding month against marginal net selling of private debt securities last month.

Equities continued to be unfavoured by foreign funds, as foreigners sold RM1.6 billion in Malaysian equities last month, more than RM800 million sold in February.

“This brings cumulative net selling to -RM1.3 billion in 1Q19 and -RM15.2 billion since 2Q18,” Goh said.

On the currency side, the ringgit is holding in a tight range of RM4.06 to RM4.08 against the US dollar as growth risks take centre stage.

The Asian Development Bank predicted that growth in Asia’s developing economies will fall to its slowest pace in nearly two decades, while the World Trade Organisation slashed its global trade projection for 2019 to the lowest level in three years.

“We keep our view of RM4.06 by mid-year and RM4.11 by year-end amid sustained risk aversion,” Goh added.

Alongside sustained merchandise trade surplus and foreign direct investment flows, Bank Negara Malaysia’s (BNM) foreign reserves rose by US$1.6 billion (RM6.56 billion) quarter-on-quarter to US$103 billion as at end-March.

The central bank’s March reserves position is sufficient to finance 7.5 months of retained imports and stands at one time total short-term external debt.

BNM’s short position in foreign-exchange swaps narrowed further to US$18.4 billion in February from US$20.2 billion in January. This is equivalent to 17.9% of total foreign reserves in February (January: 19.7%), the lowest level since August 2018.