UOB Groups Senior Economist Julia Goh and Economist Loke Siew Ting measure the latest results from the foreign portfolio inflows.
Foreign buying interest returned to Malaysian capital markets in Aug, with the best non-resident portfolio inflows since Aug 2021 at MYR7.6bn (Jul: -MYR3.4bn). The resumption of foreign purchases was seen across Malaysian debt securities (Aug: +MYR5.6bn, Jul: -MYR3.5bn) and equities (Aug: +MYR2.0bn, Jul: +MYR0.1bn).
Bank Negara Malaysia (BNM)s foreign reserves reversed course and declined by USD1.0bn m/m to USD108.2bn as at end-Aug (end-Jul: +USD0.2bn m/m to USD109.2bn). It marked the cheapest level since Dec 2020. The most recent reserves position is enough to finance 5.4 months of imports of goods & services and is 1.1 times total short-term external debt.
Aside from gloomier global growth prospects and tighter global financial conditions, greater exchange rate volatility may also spur volatility of foreign capital flows to emerging markets including Malaysia in the near term. With USD strength and CNY weakness likely to continue, we believe the MYR it’s still on the defensive contrary to the USD, hitting 4.58 by year-end and 4.60 by mid2023.
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