Ringgit bonds drew the largest monthly inflow in over a year as regional local currency debts offered both yields and relative safety following bank failures and aversion to credit risk in US and Europe.
“Inflows accelerated to RM6.6 billion in March, broadly in line with regional trend and Ringgit bonds outperforming ASEAN peers,” said Maybank Research Pte Ltd (Maybank) in a recent report.
Foreign shares of Malaysian government securities and Malaysian government securities+government investment issues rose to 36% and 23.1% respectively. Meanwhile, both Indonesia and Thailand government bonds also saw net inflows.
Foreign demand for Ringgit bonds sustained as global bonds rallied, triggered by the US regional bank failures. Inflows accelerated to RM6.6 billion in March and is the largest monthly inflow in over a year since Aug 2021.
This also marks the third consecutive month of net inflows which increased total foreign holdings to RM258.2 billion, the highest since Mar 2022.
ASEAN domestic government bonds benefitted from the risk-off environment as the region is seen to offer relative safety and limited contagion from the banking fallout in the US and EU, while China reopening provides support to EM Asia sentiment.
Indonesia received USD0.9 billion inflows albeit smaller than the USD1.5 billion into Malaysian government securities+government investment issues, while Thailand also showed a net gain according to higher frequency data from the Thai Bond Market Association.
By debt instrument, inflows were led by Malaysian government securities with RM4.4 billion, followed by government investment issues RM2.2 billion and discount instruments RM1.3 billion.
Private debt securities were the only exception with minus RM1.2 billion outflow. Foreign shares of Malaysian government securities and Malaysian government securities+government investment issues rose to levels not seen since Aug/Sep 2022 to 36% and 23.1% respectively.
Total portfolio flow amounted to RM5.2 billion in March, larger than the RM4.1 billion in February and was primarily driven by the stronger debt inflow while foreign funds net sold minus RM1.4 billion of domestic equities.
The strong portfolio flows boosted Ringgit which strengthened against the USD by 1.6% month-on-month to 4.415 at end-March. Malaysia foreign reserves also rose to USD115.5 billion at end-March, up by USD1.2 billion month-on-month.
Bank Negara Malaysia’s net short forex forward position, released at a one-month lag, narrowed slightly to minus USD26.3 billion in February.
