Malaysia: Foreign Portfolio outflows increased in July – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest foreign capital flows data in the Malaysian economy.

Key Takeaways

“Malaysia recorded further foreign outflows of MYR3.4bn in Jul albeit narrower compared to MYR5.4bn in the previous month. This has reversed year-to-date cumulative flows to an outflow of MYR0.6bn in Jan-Jul (vs inflows of MYR2.9bn in 1H22). Jul’s net foreign outflows were concentrated in MYR debt securities (-MYR3.5bn) against a small net inflow into equities (+MYR0.1bn).”

“Bank Negara Malaysia (BNM)’s foreign reserves increased by USD0.2bn m/m to USD109.2bn as at end-Jul after dropping the most in nearly seven years by USD3.8bn m/m to USD109.0bn in the preceding month. The latest reserves position is sufficient to finance 5.8 months of imports of goods & services and is 1.1 times total short-term external debt.”

“Foreign capital flows are likely to remain volatile in 2H22 and into 2023 as investors weigh global recession risk, geopolitics and inflation against the Fed’s aggressive monetary tightening. Tighter global financial conditions, negative real interest rates and a stronger USD will continue to drive flow dynamics and investors’ risk appetite for emerging market assets. In focus are China’s economic outlook and renewed geopolitical tensions with US that could further weigh on Asian FX including MYR in the near term.”