FOREIGN PORTFOLIO INFLOWS HIT RM12.7 BLN IN JULY, HIGHEST SINCE MARCH 2016 -- UOB

Foreign investors continued to favour Malaysian portfolio investment assets in July, bringing in an overall inflow of RM12.7 billion, marking the largest monthly foreign portfolio inflows since March 2016 and the seventh straight month of net foreign purchases, the longest buying streak since late 2020, according to UOB Global Economics and Markets Research. 

The research house said this was driven by non-resident inflows into both Malaysian debt securities worth RM11.3 billion and RM1.4 billion of equities in July. 

UOB also said that a return of foreign purchases of Malaysian equities also helped to steer a rebound in FTSE Bursa Malaysia KL Composite Index for the first time this year in July by 6.0% to 1,459.43 points.

“Cumulatively, foreign portfolio inflows totalled RM29.6 billion in the first seven months of 2023, purely boosted by foreign buying of Malaysian debt securities as equities recorded an outflow of RM2.8 billion so far this year.

“With that, foreign ownership of Malaysian equities dropped to a fresh record low of 19.7% of total market capitalisation last month,” it said in a note.

Last month, it said all debt instruments drew an increase in foreign purchases, led by Malaysian Government Securities (+RM7.6 billion), Government Investment Issues (+RM1.8 billion), and private debt securities, including private sukuk (+RM1.0 billion).

“Hence, foreign holdings of Malaysian government bonds increased the most since June 2020 by RM9.4 billion to RM258.1 billion as at the end of July, making up 24.0% of total government bond outstanding,” it said. 

It also marked the highest foreign shareholdings of Malaysian government bonds in 14 months.

The research firm said capital flows into Malaysia are expected to remain volatile in the near term due to continued market pricing of the endgame of the tightening cycle by global central bankers amid renewed upside risks to the inflation outlook and ongoing geopolitical tensions.

Key events to watch out for over the next month include the US Consumer Price Index figures for July, Malaysia's six state elections' results, Malaysia's second-quarter gross domestic product and current account data, revised New Industrial Masterplan and Bank Negara Malaysia's overnight policy rate decision.