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Malaysia: Foreign portfolio turned positive in October – UOB

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UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting give their opinion on the latest foreign portfolio inflows into the Malaysian economy.

Key Quotes
“Foreign portfolio flows reverted to a net inflow of MYR7.2bn in Oct (Sep: -MYR1.4bn). This was mainly driven by higher foreign buying of Malaysian debt securities (Oct: +MYR8.0bn; Sep: +MYR0.5bn). Meanwhile foreign selling of equities narrowed to a 9-month low (Oct: -MYR0.8bn; Sep: -MYR2.0bn). Year to date, foreign portfolio outflows totalled MYR10.3bn in Jan-Oct with equity outflows of MYR23.1bn outpacing debt inflows of MYR12.8bn.”

“Bank Negara Malaysia’s (BNM) foreign reserves fell by USD0.4bn to USD104.6bn as at end-Oct (vs. USD105.0bn as at end-Sep). The latest foreign reserves position is sufficient to finance 8.4 months of retained imports and is 1.0 times total short-term external debt.”

“Pending the final outcome of the US Presidential elections, it is likely that FX volatility will remain elevated. The new wave of pandemic resurgence and reinstated lockdown measures across several countries underpin caution amid a widening divergence between debt and equity space. That said, we remain positive on Asia FX on the back of expected robust growth recovery in the region which will be led by China in 2021. We remain positive on MYR amid expectations of broad dollar weakness, supportive fiscal measures to steer recovery, and steady overnight policy rate through 2021.”

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