Kenanga’s economic viewpoint on Malaysia’s Bond flow indicated that the foreign investors had turned net sellers of Malaysia’s debt securities in June(-RM4.1b; May: RM0.5b), the largest outflow in over 2-years
Malaysia recorded a quarterly net outflow in 2Q22 (-RM5.8b; 1Q22: RM2.6b) for the first time since 1Q20 (-RM16.9b). Total foreign debt holdings fell to a 7-month low (RM253.3b; May: RM257.5b), with its share of total outstanding debt decreasing to 14.0% (May: 14.4%).
Foreign demand for domestic debt was pressured by deteriorating global risk sentiment and the larger-than-expected US Fed rate hike in June. US Treasury yields moved considerably higher and narrowedMGS-UST yield spreads to their lowest levels in over 3 years, making domestic bonds less attractive to foreign investors.
For the equity market, foreign investors turned net sellers for the first time in 6 months (-RM1.3b; May: RM0.1b). Bond outflows are expected to persist over 2H22 and may worsen in July, as the Fed continues to raise interest rates.
