Malaysia: Foreign portfolio inflows seen facing headwinds in March – UOB

Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group assess the latest figures for foreign portfolio inflows in the Malaysian economy.

Key Quotes

“Malaysia’s overall foreign portfolio inflows rose by MYR6.3bn in Feb (Jan: +MYR2.8bn), mainly due to higher bond inflows (+MYR7.2bn) which offset further net selling of equities (-MYR0.9bn). This brings year-to-date bond inflows to MYR10.9bn in Jan-Feb. However, we anticipate a potential reversal of flows in March as global reflation trades intensified that prompted steepening of long-term yields and bond sell-offs.”

“Bank Negara Malaysia’s foreign reserves rose further by USD0.4bn m/m to a near 3-year high of USD109.0bn as at end-Feb (end-Jan: +USD1.0bn m/m to USD108.6bn). The latest reserves position is sufficient to finance 8.6 months of retained imports and is 1.2 times total short-term external debt.”

“Looking ahead, higher inflation expectation and steeper US Treasury yields may somewhat cap capital inflows to emerging markets (EM). Nevertheless, EM assets should be supported by ongoing quantitative easing (QE), and improving recovery across Asia.”