• Foreign holdings of MYR debts securities declined to RM254.9bn in September

• Foreigners sold RM2.7bn of MGS and RM1.3bn of GII

• Total portfolio outflows of RM6.8bn for equities and debt securities combined

• External drivers are still the key risks

Foreign outflows of Malaysia debt securities widened in October amid relentless upward repricing in US rates and financial conditions that exacerbated the MYR  weakness during the month. Foreign investors sold RM6.2bn of Ringgit bonds, the  largest drawdown in a single month since the COVID-19 crisis in March 2020,  trimming total foreign holdings of Malaysia debt securities to RM248.7bn as at end-October.

Looking into details, outflows occurred across most instruments. Foreign investors  reduced their holdings of MGS by RM2.7bn (Sep: -RM2.7bn) to RM183.8bn or 34.8%  of total MGS outstanding. Overseas investors also sold RM1.3bn of GII (Sep:  +RM0.1bn) to RM38.4bn or 8.2% of total GII. This resulted in foreign holdings of  Malaysian government bonds (MGS & GII) to decline by RM4.0bn to RM222.2bn,  which is equivalent to 22.3% of total bond outstanding. This marked the lowest level  of foreign shareholding of Malaysian government bonds since July 2020. Meanwhile, foreign holdings of discount instruments decreased by RM2.2bn while PDS was little  changed.

As at end-October 2022, foreign investors sold RM6.2bn of Malaysian bonds (Sep: - RM0.5bn; Aug: +RM5.6bn; Jul: -RM3.5bn). Meanwhile, for the equity market, foreign  selling pressure eased off in October with net sales of RM0.6bn, down from RM1.6bn  in September (Aug: +RM2.0bn; Jul: +RM0.2bn). The weakness on Malaysian equities  was partly cushioned by local buying support which reached RM1.9bn in September-October versus net foreign sales of RM2.2bn. As a result, Malaysia recorded net  overall foreign portfolio outflow of RM6.8bn in October 2022 (Sep: -RM2.1bn; Aug:  +7.6bn; Jul: -RM3.3bn). Year to date, foreign portfolio outflows amounted to  RM0.7bn as foreign investors have been net buyers of equity at RM6.0bn, but net  sellers of bonds at RM7.9bn.

Source: BIMB Securities Research - 10 Nov 2022