Malaysia: Foreign Portfolio outflows accelerated in September – UOB

Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group assess the latest foreign portfolio figures in Malaysia.

Key Takeaways

“Malaysia saw a reversal in foreign portfolio flows last month, logging a net outflow of MYR2.0bn in Sep (from a large net inflow of MYR7.6bn in Aug). This came as foreign investors shied away from both Malaysian equity (Sep: -MYR1.6bn, Aug: +MYR2.0bn) and debt (Sep: -MYR0.4bn, Aug: +MYR5.6bn) markets following tighter global monetary and financial conditions during the month.”

“Bank Negara Malaysia (BNM)’s foreign reserves declined for the second straight month and by a larger magnitude of USD2.1bn m/m to USD106.1bn as at end-Sep (end-Aug: -USD0.9bn m/m to USD108.2bn). It marked the lowest level since Nov 2020 and has taken into account the quarterly foreign exchange revaluation changes. The latest reserves position is sufficient to finance 5.6 months of imports of goods and services and is 1.1 times of the total short-term external debt.”

“Given that investors remain cautious on uncertain policy direction globally and concerned about a global recession next year, we see heightened volatility in foreign capital flows into emerging markets including Malaysia. Domestic political and policy uncertainties will pose further downside risks to non-resident portfolio flows into Malaysia in the near term. With this and expectations of persistent USD strength and CNY weakness, the MYR weakness sees little respite and likely to hit the 4.70 level earlier than we had projected.”