Foreign investors net buy Malaysian bonds for 5th successive month

Foreign investors net buy Malaysian bonds for 5th successive month

The bond market saw a net inflow of RM3 billion in May, up from RM1.5 billion in April, says RAM Ratings.

Foreign investors remain net buyers of Malaysian bonds for the fifth successive month in May, according to RAM Ratings.
PETALING JAYA:
Foreign investors remained net buyers of Malaysian bonds for the fifth successive month in May 2023, charting a net inflow of RM3 billion from the RM1.5 billion registered in the previous month.

RAM Ratings said the increase in inflow was in line with expectations that the US Federal Reserve (Fed) will end its rate hike cycle.

According to the rating agency, the take-up primarily involved Malaysian Government Securities (MGS) and Government Investment Issues (GII), following a lacklustre April.

“Foreign buying of MGS/GII in the first quarter of 2023 consisted largely of ‘non-sticky’ investors, while ‘sticky’ investors largely sold down.

“While the US Fed decided to leave the interest rate unchanged at June’s Federal Open Market Committee meeting, the latest ‘dot-plot’ projections suggest that committee members anticipate another two (rounds of) 25 basis points (bps) hikes this year,” it said in a statement today.

The rating agency said further rate hikes would continue to compress yield differentials between US Treasuries (UST) and MGS if Bank Negara Malaysia maintains the overnight policy rate at 3%.

“With the average 10-year MGS-UST yield spread sitting at a marginal 2.1bps in the first half of June (May: 17.7bps; April: 39.6bps), the narrow differential will likely dampen the appeal of Malaysian bonds in the near term,” it said.

Stay current - Follow FMT on WhatsApp, Google news and Telegram

Subscribe to our newsletter and get news delivered to your mailbox.