In a note released today, UOB’s economist and vice-president Loke Siew Ting said a slower-than-expected economic rebound in China, combined with an extended period of restrictive monetary policies in developed markets indicates a more challenging outlook for global economic growth in the second half of 2023 and beyond.

This also implies more cautious risk sentiment moving forward, she added.

Loke noted that foreign investors continued to show a preference for Malaysian portfolio investment assets in July, resulting in a total inflow of RM12.7 billion. This marked a significant increase from the previous month’s inflow of RM3.9 billion.

She said this signifies the highest amount of foreign portfolio inflows in a single month since March 2016, and it also represents the seventh consecutive month of net foreign purchases. Besides, this streak of purchases is the longest observed since the latter part of 2020.

“It was primarily fueled by inflows from non-resident investors into both Malaysian debt securities, reaching RM11.3 billion in July, the highest amount since June 2020, compared to RM5.2 billion in June,” said Loke.

“In addition, there was a net inflow of RM1.4 billion into equities in July, a reversal from the net outflow of RM1.3 billion in June,” she said.

“The renewed interest from foreign investors in purchasing Malaysian equities played a crucial role in driving a recovery in the Bursa composite index,” she further added.

This marked the first positive monthly movement this year, following a decline of 0.8% in June, which had pushed the index to its lowest monthly closing level since March 2020 at 1,376.68 points.

Loke commented that when looking at the cumulative data for the first seven months of 2023, foreign portfolio inflows amounted to RM29.6 billion. In contrast, during the same period in 2022, there had been a net outflow of RM0.6 billion.

“This year’s inflows were mainly driven by foreign investments in Malaysian debt securities, which totalled RM32.4 billion from January to July 2023. In comparison, the same period in 2022 had witnessed an outflow of RM6.8 billion from debt securities.

Equities, on the other hand, experienced an outflow of RM2.8 billion year-to-date as opposed to an outflow of RM6.2 billion during the same period in the previous year.

Consequently, foreign ownership of Malaysian equities dropped to a new all-time low of 19.7% of the total market capitalisation in the previous month, down from 19.9% in June,” she said.