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KUALA LUMPUR: Total foreign portfolio inflows nearly doubled to RM4.6 billion in the third quarter ended September 30 this year (3Q20) compared to RM2.4 billion in 2Q20, says United Overseas Bank ( Malaysia) Bhd, Market Research and Global Economics.
UOB Malaysia Senior Economist Julia Goh said this rise came despite moderation in foreign flows in the Malaysian bond market and the net sale of shares in September.
He noted that non-resident investors remained net buyers of Malaysian debt securities, albeit at a slower pace for the fifth month. Bond flows increased RM500k to RM209.5bil in September (August: + RM3bil to RM209bil).
However, Goh said that foreigners were still net sellers of Malaysian shares worth RM2 billion in September (August: -RM1.5 billion).
This caused overall foreign portfolio flows to fall by RM1.4 billion in September (August: + RM1.5 billion).
Regarding bonds, he noted that foreigners mainly bought Malaysian government (MGS) securities totaling RM1.4 billion (August: + RM3.2 billion).
This was offset by the net sale of Government Investment Issues (GII) of RM400 thousand (August: -RM200 thousand), Malaysian Treasury Bills RM400 thousand (August: -RM5 thousand), as well as private debt securities, including the private Sukuk of RM100mil (August: -RM80mil).
Foreign holdings of Malaysian government bonds (MGS & GII) increased by RM1.1 billion to RM189.4 billion (August: + RM3.1 billion to RM188.3 billion), equivalent to 23.1% of the total in circulation (August: 23.3%).
For MGS alone, foreign holdings increased by RM1.4 billion to RM169.2 billion or 38.8% of total MGS in circulation (August: 39.2%), while GII fell further to RM20.2 billion or 5.6 % of total GII in circulation (August: 5.8%).
Quarterly
On a quarterly basis, overall foreign portfolio flows posted a net inflow of RM4.6 billion in 3Q20 as debt inflows (at + RM10.6 billion) more than offset equity outflows (at -RM6 billion). ).
This compares with overall net inflows of RM2.4 billion in 2Q20 and net outflows of RM24.5 billion in 1Q20.
“Despite the rebound in foreign inflows between June and August, it was not enough to offset the biggest drops, especially in February-March, which leaves the foreign portfolio flows for the year to date at –RM17.5bil in January- September (2019: + RM8.7bik).
Meanwhile, Bank Negara Malaysia’s foreign exchange reserves increased by $ 600 million per month (or $ 1.4 billion so far this year) to a 28-month high of $ 105 billion at the end of September. (from US $ 104.4 billion at the end of September). end of August).
Goh said this was mainly due to continued debt inflows and foreign direct investment.
The last foreign reserve position was sufficient to finance 8.4 months of retained imports and is 1.1 times the short-term foreign debt.
He also said that the divergence between debt and equity flows was expected to persist in the near term, as uncertainties persist amid rising Covid-19 infections globally and in Malaysia.
“We expect a volatile period before the US presidential elections, while tensions between the US and China remain high. However, expectations of broad dollar weakness coupled with a strong economic recovery in China should boost the Asian currency market, including the ringgit, for the next 6 to 12 months.
“We expect the US dollar / ringgit to decline to 4.05 in 1H21. The key to take into account is the country’s fiscal position, the deficit and the public debt projections for 2021 in its next budget announcement on November 6, “he said.
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