by PRIYA VASU / pic by MUHD AMIN NAHARUL
MALAYSIA’S overall foreign portfolio flows rose by MYR7.7 bil in Aug (Jul: -MYR5.0 bil, Jun: -MYR1.7 bil), marking the highest monthly net inflow since Jun 2020, said UOB Global Economics & Markets Research.
Higher foreign flows into Malaysia last month follows abating domestic political risk after the appointment of new Prime Minister, and further progression in vaccination rates that paves the way for further economic recovery.
Economists Julia Goh and Loke Siew Ting said foreigners turned net buyers of domestic debt securities (+MYR6.6 bil) and equities (+MYR1.1 bil) last month.
For bonds, flows were concentrated in Malaysian Government Securities (MGS) and Government Investment Issues (GII) worth MYR3.1 bil and MYR3.2 bil respectively. Meanwhile, foreigners turned net buyers of equities for the first time since Jun 2019.
Year to date (YTD), foreign holdings of Malaysian government bonds (MGS & GII) rose by MYR23.9 bil to MYR226.1 bil as at end-Aug, which was equivalent to 25.2% of total outstanding.
For MGS, foreign investors held MYR191.7bn or 40.3% of total MGS outstanding as at end-Aug while foreign holdings of GII accumulated to MYR34.4bn or 8.6% of total GII outstanding.
Foreign ownership of Malaysian equities was unchanged at 20.2% of market capitalisation.
Bank Negara Malaysia’s (BNM) foreign reserves rose by USD5.2bn m/m to USD116.3 bil as at end-Aug, marking the highest level of reserves in nearly 7 years.
“The latest reserves position is sufficient to finance 8.3 months of retained imports and is 1.3 times total short-term external debt.
“The higher reserves reflect an additional allocation of Special Drawing Rights (SDRs) to Malaysia by the IMF,” said Julia and Loke.
Malaysia was allocated SDR3.5 bil, equivalent to USD5 bil.
The SDR allocation helps to provide additional liquidity to the global financial system, bolster reserves, build confidence, and enhance resilience of the global economy.
The economist noted the next key event to watch is BNM’s monetary policy decision tomorrow (9 Sep).
Bloomberg consensus (including us) expect BNM to keep the Overnight Policy Rate (OPR) on hold at 1.75%.