• Foreign holdings of MYR debts securities declined to RM247.4bn in June

• Foreigners bought RM0.7bn of MGS and GII

• Total portfolio outflow of RM1.7bn for equities and debt securities combined

• Hawkish shift in June FOMC could affect foreign appetite for short-term instruments

Total foreign holdings of Malaysia debt securities slipped to RM247.4bn at end-June with foreign funds turned net seller for the first time in 14 months with -RM0.5bn net outflow (May: +RM1.8bn; Apr: RM6.4bn) as foreign appetite for short-term instruments was probably affected by a hawkish shift in June FOMC. This puts a halt to the 13 months of consecutive inflows from May 2020 to May 2021

Looking into details, foreigners bought MGS totalling RM0.4bn (May: RM2.4bn; Apr: RM4.7bn) and GII of RM0.3bn (May: -RM0.7bn; Apr: +RM0.5bn). As a result, foreign holdings of MGS rose to RM192.1bn or 40.4% of total MGS outstanding and foreign holdings of GII increased to RM30.8bn or 7.9% of total GII outstanding. Correspondingly, foreign holdings of government bonds (MGS & GII) rose by RM0.7bn to RM222.9bn or 25.7% of total outstanding. Year to date (YTD), foreign holdings of Malaysian government bonds (MGS & GII) increased at the fastest pace in five years by RM20.8bn (Jan-Jun 2020: -RM7.5bn). Meanwhile, substantial net selling of BNM Bills and Treasury Bills (-RMR1.2bn) during the month were main contributors to the debt outflows.

As at end-Jun 2021, foreign investors sold RM0.5bn of Malaysian bonds (May: +RM1.8bn; Apr: +6.4bn). Meanwhile, foreign flows in domestic equities were lower with a net sell of RM1.2bn (May: -RM0.2bn; Apr: -RM1.1bn). As a result, Malaysia’s overall foreign portfolio flows turned negative for the first time in nine months to RM1.7bn (May: +RM1.6bn; Apr: +RM5.3bn) in June. Since the beginning of 2021, the cumulative bond inflows were RM24.5bn (Jan-Jun 2020: - RM5.8bn) whilst foreign outflows from Malaysian equities amounted to RM4.2bn (Jan-Jun 2020: -RM16.3bn). This resulted in net inflows of RM20.3bn in the first six months of 2021 (Jan-Jun 2020: -RM22.1bn).

Source: BIMB Securities Research - 12 Jul 2021