MALAYSIA POSTS FOREIGN INFLOWS IN MAY SUPPORTED BY DEBT PURCHASES -- UOB

KUALA LUMPUR, June 10 -- Malaysia recorded its eighth straight month of foreign portfolio inflows in May due to debt inflows, albeit at a slower pace of RM1.7 billion compared to the RM5.2 billion posted in April, UOB Malaysia said.

Senior economist Julia Goh said although foreigners remained net buyers of domestic bonds, the inflows eased to RM1.9 billion in May from RM6.4 billion in April, marking the lowest inflows level since September 2020.

Foreigners remained net sellers of domestic equities worth RM0.2 billion (April: -RM1.1 billion), she said in a note today.

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She said May’s debt inflows were primarily lifted by interests in Malaysian Government Securities (MGS) and Malaysian Treasury Bills (MTB).

Net purchases of MGS stood at RM2.4 billion in May, bringing the year-to-date (YTD) figure to RM14.4 billion, while net purchases of MTB was at RM0.2 billion last month for a YTD total of RM5.1 billion.

On the other hand, Malaysia saw a net selling of Government Investment Issues (GII) worth RM0.6 billion in May versus net purchases of RM0.4 billion in April. YTD there was a net purchase of RM5.7 billion worth of GII. 

The country also recorded net selling of private debt securities (PDS) including private sukuk valued at RM0.08 billion in May from net selling of RM0.3 billion in the previous month. PDS registered a net purchase of RM0.7 billion YTD.

Malaysia also saw stable holdings of Bank Negara Malaysia (BNM) notes from April to May.

On the slower foreign flows into Malaysia’s capital markets in May, Goh said this was in sync with the trend of easing non-resident portfolio flows into emerging markets.

"Key concerns include a mixed and slower recovery among emerging market economies given a resurgence in infections, slow pace of vaccinations, higher inflation pressures, weaker fiscal outlook and debt burden, and taper- tantrum risk," she said.

She said major events to watch for in the coming month included the Federal Open Market Committee meeting on June 15-16, update on Full Movement Control Order (FMCO) post-June 14, and Malaysia’s sovereign credit review by S&P Global Ratings.

Meanwhile, BNM's foreign reserves increased by US$0.1 billion (US$1=RM4.12) month-on-month (m-o-m) or US$3.3 billion YTD to US$110.9 billion as at end-May, the highest level since Dec 2014.

The latest reserves position is sufficient to finance 8.4 months of retained imports and is 1.1 times total short-term external debt.

The cumulative net foreign flows into Malaysian debt and equities from January to May 2021 totalled RM21.9 billion, with the bulk largely in Malaysian debt securities of RM25 billion against a net equity sell-off of RM3 billion.

Foreign ownership of Malaysian equities stood at 20.4 per cent of total market capitalisation in May compared with 22.3 per cent at end-2019.

Meanwhile, foreign holdings of MGS and GII rose by RM1.7 billion m-o-m to RM222.2 billion at end-May.

Foreign investors held RM191.7 billion or 41.1 per cent of total MGS outstanding in May, while foreign holdings of GII accumulated to RM30.5 billion or 7.9 per cent of total GII outstanding.

-- BERNAMA