KUALA LUMPUR: Foreign portfolio inflows into Malaysia extended for the eighth straight month in May but the quantum declined to RM1.70bil from RM5.20bil in April, according to UOB Economics and Markets Research.
It said on Thursday although foreigners remained net buyers of domestic bonds, the pace of inflows eased to RM1.9bil in May (vs. April: +RM6.4bil), marking the lowest inflows since September 2020.
“Foreigners remained net sellers of domestic equities of RM200mil (vs. April: -RM1.1bil), ” it said in its report.
UOB Research said slower foreign flows into Malaysia’s capital markets in May was in line 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, ” it explained.
It said May’s debt inflows were primarily lifted by inflows of Malaysian Government Securities (MGS) and Malaysian Treasury Bills (MTB).
The foreign debt inflows comprised net purchases of MGS – (May: +RM2.4bil; April: +RM4.7bil; YTD: +RM14.4bil); net selling of Government Investment Issues (GII) – (May: -RM600mil; April: +RM400mil; YTD: +RM5.7bil);
Net purchases of MTB – (May: +RM200mil; April: +RM1.5bil; YTD: +RM5.1bil); net selling of private debt securities (PDS) including private sukuk – (May: -RM80mil; April: -RM300mil; YTD: +RM700mil); stable holdings of Bank Negara notes – (May: unchanged; April: unchanged; YTD: -RM1bil).
UOB Research also said year to date (YTD), cumulative net foreign flows into Malaysian debt and equities totalled RM21.9bil in Jan-May 2021 (Jan-May 2020: -RM30.7bil).
It pointed out bulk of flows were largely in Malaysian debt securities (Jan-May 2021: +RM25bil; Jan-May 2020: -RM17.4bil) against net equity sell-offs of RM3bil (Jan-May 2020: -RM13.3bil).
“Foreign ownership of Malaysian equities remained near the 20% level, at 20.4% of total market capitalisation in May (vs. Apr: 20.3%, end-2020: 20.7%, end-2019: 22.3%).
“Foreign holdings of Malaysian government bonds (MGS & GII) rose at the slowest pace in eight months by RM1.7bil m/m to RM222.2bil as at end-May (end-Apr: +RM5.2bil m/m to RM220.5bil), which was equivalent to 25.4% of total outstanding (end-Apr: 25.5%).
For MGS, foreign investors held RM191.7bil or 41.1% of total MGS outstanding as at end-May (end-Apr: MYR189.3bil or 41.0%), while foreign holdings of GII accumulated to RM30.5bil or 7.9% of total GII outstanding (end-Apr: RM31.2bil or 8.2%).
Bank Negara Malaysia’s foreign reserves rose by US$100mil m/m or US$3.3bil year-to-date to US$110.9bil as at end-May, the highest level since December 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.
