• Foreign holdings of MYR debts securities declined to RM187.4bn

• Foreigners sold RM1.1bn of MGS and GII in August

• Total portfolio outflow of RM2.5bn for equities and debt securities combined

• Heightening global trade tensions and financial market volatility could drive further capital outflows

Foreign funds turned net seller of domestic debts with a net loss of RM2.4bn in August, after a brief recovery in July. The outflow of foreign funds was in sync with broad EM trend. This brought the total stock of foreign holdings lower to RM187.4bn in August, equivalent to 13.5%. On a YTD basis, foreign outflows from ringgit bonds expanded to RM19.4bn.

Foreign holdings of MGS in August decreased by RM0.5bn to RM153.9bn (Jul: 154.4bn; Jun: RM150.9bn; May: 158.9bn) whilst foreign ownership of GII declined by RM0.6bn to RM13.2bn (Jul: 13.8bn; Jun: RM14.3bn; May: RM14.8bn). Given the net outflow of RM1.1bn to RM167.1bn in foreign ownership of government debt (MGS + GII), total foreign holding in government debt dipped slightly to 24.7% from 24.8% in July. With foreign share at 24.7% for MGS+GII, foreign positioning is not significant and is comparatively lower from 36.0% in October 2016.

Meanwhile, foreign holdings of discount instruments and PDS declined by RMRM0.7bn and RM0.6bn to RM 7.0bn and RM13.3bn respectively. As a result, in combined amounts (inclusive of short-term bills/notes and corporate bonds/sukuk), foreign holding levels in August 2018 were lower by RM2.4bn, bringing total foreign ownership of MYR bonds to RM187.4bn or 13.5%. As at end-August, there were RM2.4bn outflows (Jul: +RM4.0bn; Jun: -RM6.7bn; May: -RM12.9bn) from total debt securities. The total foreign outflow from equity market in August shrank to just -RM97.4m, compared to -RM1.7bn in July. This marks the fourth consecutive month of gradual decline in foreign selling since May 2018 (Jun: -RM4.9bn; May: -RM5.8bn). This means a total portfolio outflow of RM2.5bn for equities and debt securities combined (Jul: +2.3bn; Jun: -RM11.6bn; May: -RM18.7bn). In the corresponding period, Malaysia’s foreign international reserves fell for the second straight month by a marginal USD0.1bn or 0.1% mom to USD104.4bn (July: USD104.5bn; June: USD104.7bn).

Source: BIMB Securities Research - 12 Sept 2018