KUALA LUMPUR, Jan 9 — Malaysia attracted foreign portfolio inflows of RM8.8 billion in 2019 — a six-year high — compared to an outflow of RM33.6 billion recorded in 2018.
This followed a second straight month of inflows in December, amounting to RM7 billion, after November’s inflows of RM6.5 billion, UOB Global Economics and Markets Research said.
It said higher demand for Malaysia’s government bonds helped to offset foreign outflows from the equity market.
“In the final month of 2019, foreign investors continued to enter Malaysia’s bond markets with RM8.1 billion. Meanwhile, foreign outflows from Malaysian equities persisted, albeit net selling narrowing to RM1.1 billion in December,” UOB said in a research note today.
Strong foreign purchases of Malaysian debt securities worth RM19.9 billion in 2019, compared to foreign selling valued at RM21.9 billion in the preceding year, was the sole contributor to overall foreign portfolio inflows last year, it noted.
This was more than enough to offset foreign outflows of RM11 billion from the Malaysian equity market (2018: RM11.7 billion).
“Foreign shareholdings of Malaysian government bonds rebounded close to the pre-general election high of 24.3 per cent as at end-December 2019. Conversely, foreign ownership of Malaysian equities slid to its lowest level in more than two-and-a-half years,” UOB said.
Foreign holdings of Malaysian government bonds spiked up RM8.2 billion to RM185 billion in December 2019 from RM176.8 billion in the previous month. This was equivalent to 24.3 per cent of total government bond outstanding, the highest level since May 2018, it said.
For Malaysia Government Securities (MGS) alone, foreign holdings amounted to RM163.9 billion in December compared to RM158.4 billion in the preceding month, which was equivalent to 41.6 per cent of total outstanding.
Foreign holdings of Government Investment Issues (GII) amounted to RM21.1 billion as at end-December last year from RM18.4 billion a month earlier, which was the highest level since December 2016 — equivalent to 6.2 per cent of total GII outstanding.
Reflecting the record foreign portfolio inflows, higher current account surplus and sustained net foreign direct investments, Bank Negara Malaysia’s (BNM) foreign reserves ended 2019 at a five-year high of US$103.6 billion (RM424 billion) compared to US$101.1 billion as at end-2018, UOB said
“The latest reserves position is sufficient to finance 7.5 months of retained imports and is 1.1 times short-term external debt.
“While BNM has yet to release its December 2019 foreign exchange (forex) swaps number, the central bank’s short position in forex swaps narrowed by US$600 million to US$13.3 billion as at end-November 2019. November’s forex swap short position was equivalent to 12.9 per cent of total foreign reserves,” it said. — Bernama
