• Foreign holdings of MYR debts securities increased to RM208.2bn

• Foreigners bought RM3.1bn of MGS and GII

• Total portfolio inflow of RM3.4bn for equities and debt securities combined

• BNM’s surprise cut propelled local bond demand

Foreign portfolio inflows continued in January, driven by hefty foreign purchases of Malaysian debt securities, which fully offset the persistent foreign outflows from the equity market. The foreign inflows can be attributed to a combination of BNM’s preemptive rate cut (OPR cut by 25bps to 2.75%), a stronger Ringgit and the coronavirus outbreak boosting demand for bonds globally.

Looking into details of Malaysian debt securities, Malaysian Government Securities (MGS) was the biggest beneficiary, attracting RM3.3bn of foreign purchases (Dec: +RM5.5bn; Nov: +RM4.7bn) while GII had marginal outflows of RM0.2bn (Dec: +RM2.7bn; Nov: +RM3.0bn). Percentage wise, foreign holdings of MGS increased to 41.7% whilst foreign holdings of GII decreased to 6.1% of the outstanding. Correspondingly, foreign holdings of Malaysian government bonds (MGS & GII) rose by RM3.1bn to RM188.1bn (Dec: +RM8.2bn to RM185.0bn; Nov: +RM7.7 to RM176.8bn), which is equivalent to 25.3% of total outstanding (Dec: 25.2%; Nov: 24.2%).

Foreign holdings of discount instruments increased by RM0.5bn to RM7.0bn. On the other hand, foreign holdings of PDS decreased by RM0.1bn to RM13.1bn. As a result, in combined amounts (inclusive of short-term bills/notes and corporate bonds/sukuk), foreign holding levels in January 2020 were higher by RM3.5bn, bringing total foreign ownership of MYR bonds to RM208.2bn or 13.8%.

As at end-January, international investors bought RM3.5bn of Malaysian bonds (Dec: +RM8.1bn; Nov: +RM8.0bn; Oct: -RM0.5bn; Sep: +RM0.9bn). Nevertheless, foreign investors continued to shy away from Malaysian equities for the seventh consecutive month, decreasing their holdings marginally by RM0.1bn in January (Dec: -RM1.2bn; Nov: -RM1.5bn; Oct: -RM485m; Sep: -RM559m). This means a total portfolio inflow of RM3.4bn for equities and debt securities combined.

Source: BIMB Securities Research - 10 Feb 2020