Malaysia: Foreign Portfolio climbed to multi-year highs – UOB

Malaysia remains an attractive destination for foreign portfolio inflows, according to UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting.

Key Quotes

“Malaysia continued to attract foreign portfolio inflows for the second straight month in Dec (+MYR7.0bn, Nov: +MYR6.5bn), bringing full-year flows to a 6-year high of MYR8.8bn in 2019 (2018: -MYR33.6bn). Higher demand for Malaysia’s government bonds helped to offset foreign outflows from the equity market. The recovery was aided by looser global monetary policy and the US-China trade truce.”

“Higher portfolio inflows, improved current account surplus, and sustained net foreign direct investments helped to lift overall foreign reserves to a 5-year high of USD103.6bn as at end2019 (end-2018: USD101.4bn). The latest reserves position is sufficient to finance 7.5 months of retained imports and is 1.1 times short-term external debt.”

“Despite the MYR recovering by 1.0% to 4.0910 against the USD in 2019 (2018: -2.1% to 4.1335), lingering trade conflicts and heightened geopolitical tensions could weigh on the MYR. The escalating US-Iran tensions and pending Phase One trade deal between the US and China have pushed up USD/MYR to close at 4.1010 yesterday (8 Jan).”