Foreign investors net buyers of Malaysian bonds in December 2021

by BERNAMA / pic by TMR FILE

FOREIGN investors turned net buyers of Malaysia’s debt securities in December last year, totalling RM6.1 billion, after a month of net selling in November for RM3.6 billion.

Total foreign debt holdings increased to RM256.6 billion compared to November’s RM250.4 billion, while its share of total outstanding debt rose to 14.8%, a seven-month high.

Kenanga Investment Bank Bhd, in a research note, said demand was likely driven by the return of global risk-on sentiment as Omicron fears began to subside, following reports that it was less severe than other Covid-19 variants.

“Furthermore, domestic bonds retained high yield differentials against many developed market bonds, keeping them attractive despite monetary policy tightening by major central banks.

“December’s inflow was driven by a sizable net increase in holdings of Malaysian Government Securities (MGS) and Government Investment Issues, which out-weighed a softer rise in holdings of Malaysian Treasury Bills,” it added.

For the equity market, the research firm noted that foreign investors turned net sellers for the first time in five months, selling a total of RM1.1 billion worth of shares compared to the RM200 million net buy in November.

It said demand for equities may have been hindered by lingering uncertainty over the Omicron and the US Federal Reserve’s increasingly hawkish tilt, as it quickened the pace of its tapering process.

Overall, Kenanga Investment said the capital market registered its largest inflow in four months amounting to RM5 billion.