KUALA LUMPUR, Dec 18 ― The foreign bond flows reversed in November to RM5.2 billion, leading to a month-on-month decline compared with RM7.8 billion in October, says RAM Rating Services Bhd.

Head of Research Kristina Fong said this was not entirely surprising, given the myriad developments during the month, prompting foreign investors to park their funds elsewhere.

“If not for some portfolio rebalancing by index-based investors, the scales would be tipped towards even greater outflow pressure going forward. Lingering global uncertainties over the US-China trade spat and Brexit outcome still take centre stage, fuelling global risk aversion,” she said in a statement.

Fong said the new government’s 2019 Budget 2019 on November 2 pointed to a wider-than-expected targeted fiscal deficit of 3.7 per cent of gross domestic product (GDP) this year and 3.4 per cent the next, raising concerns about how the “Big 3” rating agencies would react to this development.

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That said, there may be some respite from fiscal concerns in December as Moody’s had reaffirmed Malaysia’s A3 sovereign rating and maintained its stable outlook earlier in the month.

“Other than the 2019 Budget, foreign holdings also declined throughout November due to positioning in the lead-up to the Fed’s continued tightening in December, the ringgit’s weakness relative to its regional peers, and Malaysia’s more subdued GDP growth of 4.4 per cent in the third quarter of 2018.

“We also observe a clear moderation in the issuance of infrastructure-related debt securities. We expect this trend to continue as the government maintains its stance on rationalising the country’s debts through more stringent management of project costs and timelines,” she said.

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As such, the rating agency envisaged gross corporate issuance to moderate to RM70 billion-RM80 billion in 2019. ― Bernama