Malaysia’s total foreign outflow in June 2022 at RM4.1 billion – RAM Ratings

KUALA LUMPUR, July 22 — The overall total foreign outflow amounted to RM4.1 billion last month, as foreign investors turned net sellers of Malaysian Government Securities (MGS) and Government Investment Issue (GII), said RAM Ratings.

It said that foreign investors had reduced their holdings by RM4.3 billion after a brief respite in May, adding that the foreign outflow was largely induced by fears of a more aggressive monetary policy tightening in the United States (US) as well as risk aversion amid rising concerns over a potential global economic slowdown.

“The flight-to-safety sentiment resulted in a broad rise in bond yields as the one-year and 10-year MGS yields climbed 33.1 basis points (bps) and 6.5 bps month-on-month, respectively, as of end-June,” it said in a statement today.

Interest in the short-term government securities, Malaysian Treasury Bills (MTB) and Malaysian Islamic Treasury Bills (MITB) also remained positive, with net foreign purchases of RM233.1 million in June, extending the inflow streak to five consecutive months.

Meanwhile, RAM Ratings said selling pressure on longer-duration bonds appeared to have waned since mid-June as long-term yields started to fall despite a continued uptick in short-term yields.

It noted that the 10-year MGS yield fell to 4.06 per cent on July 20 from  4.33 per cent on June 15, tracking the decline in the 10-year US Treasury bond yield which fell to 3.04 per cent from 3.33 per cent over the same period.

The rating agency attributed the dip in the long-term yield to the growing trepidation over a potential US recession, which could entail future rate stays or cuts.

“As investors continue to assess the economic outlook, longer-term yields are expected to remain pressured on the downside in the near term, while shorter-term yields will likely continue to trend upwards in response to further monetary policy tightening,” it added.

NMT as reported by Bernama