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Senior Economist at UOB Group Julia Goh and Economist Loke Siew Ting reviewed the recent releases in Malaysia.

Key Quotes

“Foreign buying interest in Malaysian debt securities was resilient in December despite Fitch Ratings’ downgrade of Malaysian sovereign rating on 4 Dec. Year-end portfolio rebalancing activities lifted overseas investors’ interest in Malaysian assets. Hence, foreign portfolio inflows amounted to MYR3.0bn in Dec 2020 (Nov: +MYR0.9bn), with debt securities attracting a net inflow of MYR3.6bn during the month (Nov: +MYR1.9bn) while equity outflows narrowed to the smallest amount in 11 months at MYR0.6bn (Nov: -MYR1.0bn).”

“For the full year of 2020, Malaysia reversed course and posted total foreign portfolio outflows of MYR6.3bn, from a net inflow of MYR8.7bn in 2019. This was mainly due to foreign equity outflows for the third straight year (2020: -MYR24.6bn; 2019: -MYR11.1bn), which fully offset the foreign inflows into debt markets (2020: +MYR18.3bn; 2019: +MYR19.9bn). As such, foreign shareholdings of Malaysian bonds held steady at 24.2% at end-2020 (end-2019: 24.3%).”

“The continuation of foreign capital inflows and current account surplus lifted Bank Negara Malaysia’s (BNM) foreign reserves to a multi-year high of USD107.6bn at end-Dec 2020 while MYR ended 2020 firmer by 2% against the USD to 4.02. We expect MYR to appreciate alongside other Asian currencies against broad dollar weakness. However domestic uncertainties may weigh on the pace in the near term. Malaysia is expected to announce more stringent COVID19 containment measures today (11 Jan) as new daily COVID-19 infections rose to record highs. Meanwhile domestic political developments continue to linger. We reiterate our USD/MYR forecast of 4.00 by end-2Q21 and 3.95 by end-4Q21.”