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

Key Quotes

“Despite moderating foreign flows into Malaysia’s bond market and net selling of equities in Sep, overall foreign inflows almost doubled to MYR4.6bn in 3Q20 (from MYR2.4bn in 2Q20).”

“Bank Negara Malaysia’s (BNM) foreign reserves rose further by USD0.6bn m/m to a 28-month high of USD105.0bn as at end-Sep (from USD104.4bn as at end-Aug). The latest foreign reserves position is sufficient to finance 8.4 months of retained imports and is 1.1 times shortterm external debt.”

“The divergence between debt and equity flows is expected to persist in the near term as uncertainties linger amid rising COVID-19 infections globally and in Malaysia. We expect a volatile period ahead of the US Presidential elections while US-China tensions remain elevated. However, expectations of broad dollar weakness alongside a robust economic recovery in China should lift Asia FX including MYR over the next 6-12 months. We expect USD/MYR to edge down to 4.05 by 1H21.”