Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group review the latest Foreign Portfolio flows in Malaysia.
Malaysia recorded another month of foreign portfolio outflows (Sep: MYR3.8bn), solely due to net outflows from Malaysian debt securities (Sep: MYR4.4bn) that fully offset the third month of net inflows into equities (Sep: +MYR0.6bn). In 3Q23, overall foreign portfolio flows remained positive albeit lesser at MYR4.0bn (2Q23: +MYR7.4bn, 1Q23: +MYR9.5bn), mainly attributed to lower debt inflows (3Q23: +MYR1.8bn, 2Q23: +MYR9.8bn). Foreign equity inflows recorded the highest quarterly inflows in 1½ years at MYR2.2bn (2Q23: -MYR2.3bn).
Bank Negara Malaysia (BNM)’s foreign reserves fell the most in 15 months by USD2.4bn m/m to USD110.1bn as at end-Sep (end-Aug: -USD0.5bn m/m to USD112.5bn). The latest reserves position is sufficient to finance 5.1 months of imports of goods & services and is 1.0 times the total short-term external debt. BNM’s net short position in FX swaps narrowed by USD1.4bn to USD22.9bn as at end-Aug.
Market concerns continue as higher-for-longer US interest rates and renewed geopolitical risks inject further uncertainty. US 10Y Treasury yields hover at 4.8% (from 3.8% at end-2Q23) and several drivers are pushing long-term yields higher including rising odds for another 25bps Fed rate hike in Nov, elevated debt issuances and risks of another government shutdown closer to the 17 Nov deadline. On the ground, the key announcement will be Budget 2024 this Fri (13 Oct), which is expected to feature a lower fiscal deficit target, subsidy rationalization, revenue enhancements, and record development expenditure.
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