Foreign investors reverse trend, net-buying Malaysia’s debt in March after three straight months of outflows (RM1.7b; Feb: -RM1.2b)
As a result, total foreign debt holdings increased to RM265.8b in March (Feb: RM264.1b). However, its share of the total outstanding debt dropped to a 44- month low of 13.10% (Feb: 13.11%) due to new issuance and reopening of GII amounting to RM10.0b and reopening of MGS amounting to RM5.0b.
Initially, during the period of March 13-15, foreign investors divested RM1.0b worth of Malaysian government bonds, a move attributed to the unexpectedly robust core inflation reading in the US. However, subsequent actions taken by the government
and BNM to facilitate the repatriation and conversion of foreign investment income of Government Link Investment Companies contributed to a strengthening of the ringgit, thereby enticing investors to redirect their funds into the Malaysian debt market. As expected, the allure of a potentially strengthening ringgit, along with expectations of a possible Fed rate cut in June, may have revived some interest in Malaysian debt securities.
Foreign investors loaded up on long-term bonds, that is, Government Investment Issue (GII) and Malaysian Government Securities (MGS), but reduced their exposure to Malaysia Treasury Bills (MTB) GII (RM1.4b; Feb: -RM2.2b): largest inflow in four months, increasing the foreign holdings share to 8.9% (Feb: 8.8%), which is the second lowest point in a year, partly due to an increase in the total outstanding.
MGS (RM0.8b; Feb: RM0.6b): second consecutive months of net foreign buying. However, the foreign holdings share continued to decline to 33.2% (Feb: 33.3%). MTB (-RM0.4b; Feb: RM0.0b): reverted to an outflow after last month’s marginal net buying (RM1.6m), resulting in the foreign holdings share reaching 3.8% (Feb: 10.1%) its lowest level since January 2015 (1.5%).
