BNM: Financial markets faced selling pressure in May

Bank Negara Malaysia says the outflows were due mainly to risk-off sentiment in regional markets given expectations of faster-than-expected interest rate increases by the Federal Reserve, stronger US dollar, and continued trade tension. — Picture by Yusof Mat Isa
Bank Negara Malaysia says the outflows were due mainly to risk-off sentiment in regional markets given expectations of faster-than-expected interest rate increases by the Federal Reserve, stronger US dollar, and continued trade tension. — Picture by Yusof Mat Isa

KUALA LUMPUR, June 29 ― The domestic financial markets in May experienced selling pressure by non-residents due to a confluence of external and domestic factors, Bank Negara Malaysia said.

It said the outflows were due mainly to risk-off sentiment in regional markets given expectations of faster-than-expected interest rate increases by the Federal Reserve, stronger US dollar, and continued trade tension.

“On the domestic front, sentiments remained cautious as investors awaited greater policy clarity post-election. As a result, the FBM KLCI declined by 6.9 per cent during the month, weighed by uncertainties which particularly affected the construction sector,” it said.

The central bank added that the five-year MGS yield increased by 5.8 basis points amid a slight tightening in liquidity as reflected by a widening bid-ask spread to 3.5 basis points (April: 2.8 basis points).

Meanwhile, in the foreign exchange market the ringgit depreciated by 1.4 per cent against the US dollar, due mainly to net portfolio outflows during the month. The depreciation was, however, in line with regional currencies.

Headline inflation was 1.8 per cent last month, and despite unchanged domestic fuel prices, the transport category registered higher inflation of 3.8 per cent, reflecting the decline in prices in the base period of May 2017.

Inflation in the food and non-alcoholic beverages category continued its moderating trend to record 2.2 per cent, partly due to lower prices of fresh fish.

Exports accelerated to 14.0 per cent in April 2018 (March: 2.2 per cent), supported mainly by strong growth in the semiconductor segment and turnaround in non-E&E exports.

“Going forward, export growth will continue to benefit from favourable external demand and commodity prices,” the bank said. ― Bernama

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