KUALA LUMPUR (May 10): Malaysia witnessed an inflow of RM6.4 billion from abroad into the domestic bond market in April, as foreigners continued to be the net seller in the local equity market amounting to RM1.1 billion, according to UOB Group.
In a research note today, UOB highlighted the foreign inflow into the bond market was supported by the FTSE Russell’s decision to remove Malaysia from the watch list and retain the country in its World Government Bond Index (WGBI).
“Year-to-date (YTD), cumulative foreign inflows into Malaysia’s bond and equities totalled RM20.3 billion with flows concentrated in bonds against foreign net equity sell-off of RM2.8 billion.
“Domestic bond yields have retreated from the highs in March alongside US Treasury yields. Risk-off sentiment was also reinforced by the latest resurgence in Covid-19 infections, tighter containment measures and Bank Negara Malaysia’s (BNM) neutral monetary policy stance,” it said.
UOB added foreign holdings of Malaysian Government Bonds — Malaysia Government Securities (MGS) and Government Investment Issues (GII) — rose by RM5.2 billion in April to RM220 billion, marking the highest share since April 2018.
Meanwhile, UOB also pointed out that BNM’s foreign reserves are currently at a seven-year high, with reserves going up by US$2.2 billion month-on-month (m-o-m) to US$110.8 billion as at end of April this year.
“YTD, foreign reserves increased by US$3.2 billion from US$107.6 billion as at end-2020 amid a sustained current account surplus in 1Q21 and higher foreign flows into bond markets.
“The latest reserves position is sufficient to finance 8.7 months of retained imports and is 1.3 times total short-term external debt.
“While BNM has yet to publish its Foreign Exchange’s April (FX) swaps data, the central bank’s net short position in FX swaps widened further by US$1.2 billion (m-o-m) to US$8.9 billion or 8.2% of total foreign reserves as at end of March,” it highlighted.
