UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest results from the foreign portfolio inflows.

Key Takeaways

“Foreign buying interest returned to Malaysian capital markets in Aug, with the highest 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 lowest level since Dec 2020. The latest reserves position is sufficient to finance 5.4 months of imports of goods & services and is 1.1 times total short-term external debt.”

“Apart from gloomier global growth prospects and tighter global financial conditions, greater exchange rate volatility will also spur volatility of foreign capital flows to emerging markets including Malaysia in the near term. With USD strength and CNY weakness expected to continue, we think that the MYR will still be on the defensive against the USD, hitting 4.58 by year-end and 4.60 by mid2023.”