• Foreign holdings of MYR debts securities increased to RM188.3bn

• Foreigners bought RM5.6bn of MGS

• Total portfolio inflow of RM5.62bn for equities and debt securities combined

• Global risk-off sentiment could support bonds market

Foreign inflows continue in July as risks appetite for EM debts returned in tune with the dovish shift by major central banks which revived the hunt for yield.

Foreign investors bought Malaysia’s debt securities in July as total foreign holdings increased by RM5.7bn to RM188.3bn. Foreign holdings of MGS increased by RM5.7bn to RM154.7bn (Jun: RM149.1bn; May: 143.3bn; Apr: RM147.1bn; Mar: 150.7bn; Feb: RM149.3bn; Jan: RM144.4bn). While total amount of foreign holdings of GII was flattish, the foreign share of GII ticked lower to 4.4% (Jul: RM14.7bn; Jun: RM14.7bn; May: RM14.7bn; Apr: RM15.2bn; Mar: RM18.7; Feb: RM17.4bn; Jan: RM16.6bn). These increased foreign holdings of Malaysian government bonds (MGS & GII) by RM5.7bn to RM169.4bn, or 23.0% of total bonds outstanding in July. For MGS alone, foreign investors held 38.3% of total MGS outstanding.

Foreign holdings of discount instruments increased by RM0.2bn to RM7.0bn as foreign investors bought Malaysian Treasury Bills. Foreign holdings of PDS declined slightly by RM0.1bn to RM11.9bn. As a result, in combined amounts (inclusive of short-term bills/notes and corporate bonds/sukuk), foreign holding levels in July 2019 were higher by RM5.7bn, bringing total foreign ownership of MYR bonds to RM188.3bn or 12.6% (Jun: 12.2%; May: 11.9%). Of the total, MGS made up the biggest portion, followed by Treasury bills.

As at end-July, international investors bought RM5.7bn of Malaysian bonds (Jun: +RM6.7bn; May: -RM4.2bn; Apr: -RM9.9bn; Mar: +RM3.0) whilst foreign investors sold RM79.2m from equities (Jun: +RM134.6m; May: -RM2.04bn; Apr: -RM1.4bn; Mar: -RM1.6bn), the fifth month of foreign net outflow for the year. This means a total portfolio inflow of RM5.62bn for equities and debt securities combined.

Source: BIMB Securities Research - 8 Aug 2019