Malaysia: Foreign demand for domestic bonds lost traction in May – UOB

Foreign inflows into the Malaysian debt market seems to have lost some momentum in May, according to Julia Goh, Senior Economist at UOB Group, and Economist Loke Siew Ting.

Key Quotes

“Malaysia recorded an eighth straight month of foreign portfolio inflows totalling MYR1.7bn in May (Apr: +MYR5.2bn). Although foreigners remained net buyers of domestic bonds, pace of inflows eased to MYR1.9bn (vs. Apr: +MYR6.4bn), marking the lowest inflows since Sep 2020. Foreigners remained net sellers of domestic equities of MYR0.2bn (vs. Apr: -MYR1.1bn).”

“Bank Negara Malaysia’s foreign reserves rose by USD0.1bn m/m or USD3.3bn year-to-date to USD110.9bn 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.”

“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 tapertantrum risk.”