Malaysia: Foreign Portfolio inflows moderated in September – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest foreign portfolio figures in Malaysia.

Key Takeaways

“Malaysia continued to receive foreign portfolio inflows for the second consecutive month, albeit moderate at MYR1.4bn in Sep (Aug: +MYR7.7bn), bringing the accumulated overseas capital inflows to MYR4.1bn in 3Q21 (2Q21: +MYR5.3bn). Non-residents remained net buyers of domestic debt securities (+MYR0.6bn) and equities (+MYR0.7bn) for two months in a row in Sep. This helped to push up year-to-date overall foreign portfolio inflows to the highest level since 2016, at MYR24.3bn (Jan-Sep 2020: -MYR17.5bn).”

“Bank Negara Malaysia’s (BNM) foreign reserves dropped the most since Mar 2020 by USD1.1bn m/m to USD115.2bn as of end-Sep. This came after taking into account the quarterly foreign exchange revaluation changes, whereby the MYR weakened by 0.8% q/q to 4.1880 against the USD at the end of 3Q21 (end-2Q21: +0.1% q/q to 4.1543). The latest reserves position is sufficient to finance 8.2 months of retained imports and is 1.3 times of total short-term external debt.”

“Near-term capital flows into emerging markets including Malaysia are expected to remain volatile as market jitters surrounding the global monetary policy normalisation, China’s regulatory crackdown, elevated inflationary pressures, and a global energy crunch continue to take center stage. Domestically, positive developments in the national vaccination program, relaxations of lockdown measures, and bipartisan cooperation are seen as key catalysts for Malaysia’s capital flows ahead. Major events to watch this month (Oct) include IMF’s world economic outlook (between 11-17 Oct) and Malaysia’s Budget 2022 (on 29 Oct).”