• Foreign holdings of MYR debts securities declined to RM184.5bn
• Foreigners sold RM5.6bn of MGS and bought RM1.1bn of GII in September
• Total portfolio outflow of RM2.8bn for equities and debt securities combined
• Lack of conviction for foreign funds to return

Foreign funds remained net seller of domestic debts with a net loss of RM2.9bn in September. The Malaysian bond market felt the adverse impact from emerging market (EM) risk aversion, signified by the rise in yields early September. This was also reflected in August as yields also rose then.

Foreign holdings of MGS in September decreased by RM5.6bn to RM148.3bn (Aug: RM153.9bn; Jul: 154.4bn; Jun: RM150.9bn). However, foreign investors turned net buyer of GII by RM1.2bn to increase their holdings of GII to RM14.4bn (Aug: RM13.2bn; Jul: 13.8bn; Jun: RM14.3bn). Given the net outflow of RM4.4bn to RM162.7bn in foreign ownership of government debt (MGS + GII), total foreign holding in government debt dipped further to 24.1% from 24.7% in August.

Meanwhile, foreign holdings of discount instruments increased by RM1.6bn as foreign investors bought Malaysian Treasury Bills (+RM2.3bn) and Malaysian Islamic Treasury Bills (+RM0.4bn). However, foreign holdings of PDS declined by RM0.1bn to RM13.2bn. As a result, in combined amounts (inclusive of short-term bills/notes and corporate bonds/sukuk), foreign holding levels in September 2018 were lower by RM2.9bn, bringing total foreign ownership of MYR bonds to RM184.5bn or 13.3%. On YTD basis, foreign outflows from ringgit bonds expanded to RM22.3bn.

As at end-Sep, foreigners turned net sellers of Malaysian bonds (RM2.9bn) and equities (RM66m). This means a total portfolio outflow of RM2.8bn for equities and debt securities combined (Aug: -RM2.5bn; Jul: +2.3bn; Jun: -RM11.6bn; May: - RM18.7bn). In the corresponding period, Malaysia’s foreign international reserves fell for the third straight month by USD1.3bn to USD103.0bn (Aug: USD104.4bn; July: USD104.5bn; June: USD104.7bn).

Source: BIMB Securities Research - 8 Oct 2018