UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting review the latest foreign portfolio figures in Malaysia.
Foreign portfolio inflows persisted for the fifth straight month in May with an increase to MYR2.2bn (from +MYR1.3bn in Apr). It was purely driven by net foreign purchases of Malaysian debt securities (at MYR3.0bn vs +MYR1.5bn in Apr) as equity space continued to face foreign selling pressures for the ninth consecutive month (at MYR0.8bn vs –MYR0.3bn in Apr). This brought year-todate (ytd) foreign portfolio inflows higher to MYR13.0bn in the first five months of 2023 (Jan-May 2022: +MYR8.3bn).
Bank Negara Malaysia (BNM)’s foreign reserves fell further by a larger magnitude of USD1.7bn m/m to USD112.7bn as at end-May (end-Apr: -USD1.1bn m/m to USD114.4bn) amid a weaker MYR in the month. The latest reserve position is sufficient to finance 4.8 months of imports of goods & services, the lowest level since the inclusion of services component in Feb 2022, and is 1.0 time of total short-term external debt. BNM’s net short position in FX swaps narrowed the most since Mar 2019 by USD3.1bn m/m to USD23.6bn as at endApr (end-Mar: +USD0.5bn m/m to USD26.7bn).
Going forward, we continue to see challenges for capital flows into emerging markets (EMs) including Malaysia. This is mainly premised on (i) weaker-thanexpected China economic data releases in recent months, implying a softer economic recovery path; (ii) renewed expectations of a Fed rate hike by Jul and lower bets on a Fed rate cut in 2H23; (iii) as well as uncertainty surrounding Malaysia’s six state elections amid ongoing geopolitical risks.
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