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UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assessed the latest data for foreign inflows into the Malaysian economy.

Key Quotes

“Foreigners continued to snap up Malaysian debt securities by MYR1.9bn in Nov (Oct: +MYR8.0bn). This marks the seventh month of net foreign inflows entering domestic bonds which helped to offset continued outflows from Malaysian equities (Nov: -MYR1.1bn; Oct: -MYR0.7bn). Foreign inflows primarily entered Malaysian government securities that lifted foreign holdings of MGS and GII by MYR2.7bn to a 4-year high of MYR198.4bn or 23.9% of total outstanding in Nov.”

“Bank Negara Malaysia’s (BNM) foreign reserves rose by USD0.7bn m/m to a 2½-year high of USD105.3bn as at end-Nov (from USD104.6bn as at end-Oct). The latest foreign reserves position is sufficient to finance 8.6 months of retained imports and is 1.2 times total short-term external debt.”

“There was mild sell-off in both the MYR and longer-dated Malaysian government bonds yesterday (7 Dec) post the Fitch Ratings’ downgrade of Malaysian sovereign rating last Friday (4 Dec). We expect this knee-jerk reaction to be temporary as underlying sentiment is firm amid better domestic growth outlook for 2021, sustained low interest rates, mild bond supply concerns next year, and expectations of broad dollar weakness. We reiterate our view for USD/MYR to ease to 4.00 by end-2Q21 and 3.95 by end-4Q21.”