Foreigners remain net buyers of bonds in December

• Foreign holdings of MYR debts securities increased to RM204.7bn
• Foreigners bought RM8.4bn of MGS and GII
• Total portfolio inflow of RM6.9bn for equities and debt securities combined
• Expected gross MGS/MGII supply of RM115bn-RM118bn for 2020

Non-resident portfolio inflows continued in December, solely driven by hefty foreign purchases of Malaysian debt securities, which fully offset the persistent foreign outflows from the equity market. The optimism over an agreement to the Phase One trade deal of US-China trade talks were key factors spurring portfolio flows into emerging markets (EMs) including Malaysia.

Looking into details of Malaysian debt securities, all but Treasury bills and Malaysian Islamic Treasury Bills garnered increased foreign buying interest. Malaysian Government Securities (MGS) was the biggest beneficiary, attracting RM5.5bn of foreign purchases (Nov: +RM4.7bn) while GII attracted modest flows of RM2.7bn (Nov: +RM3.0bn). Percentage wise, foreign holdings of MGS increased to 41.6% whilst foreign holdings of GII increased to 6.2% of the outstanding. Correspondingly, foreign holdings of Malaysian government bonds (MGS & GII) surged by RM8.4bn to RM185.0bn in December (Nov: +RM7.7 to RM176.8bn), which is equivalent to 25.2% of total outstanding (Nov: 24.2%), marking the largest shareholding since May 2018. Foreign holdings of discount instruments decreased by RM0.7bn to RM6.5bn.

Foreign holdings of PDS increased by RM0.6bn to RM13.2bn. As a result, in combined amounts (inclusive of short-term bills/notes and corporate bonds/sukuk), foreign holding levels in December 2019 were higher by RM8.1bn, bringing total foreign ownership of MYR bonds to RM204.7bn or 13.7%.

As at end-December, international investors bought RM8.1bn of Malaysian bonds (Nov: +RM8.0bn; Oct: -RM0.5bn; Sep: +RM0.9bn; Aug: -RM0.1bn; Jul: +RM5.7bn). Nevertheless, foreign investors continued to shy away from Malaysian equities for the sixth consecutive month, decreasing their holdings by RM1.2bn in December (Nov: -RM1.5bn; Oct: -RM485m; Sep: -RM559m; Aug: -RM2.6bn; Jul: -RM79m). This means a total portfolio inflow of RM6.9bn for equities and debt securities combined.

Source: BIMB Securities Research - 9 Jan 2020