KUALA LUMPUR, 10/6/2021 – 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 taper-tantrum risk. Major events to watch for in the coming month include FOMC meeting (on 15-16 Jun), update on Full Movement Control Order (FMCO) post 14 Jun, and Malaysia’s sovereign credit review by S&P.
Flash note from Ms Julia Goh, Senior Economist, UOB Malaysia