Malaysia's bond market records net foreign inflow of RM6.6bil in August

TheStar Wed, Sep 15, 2021 03:21pm - 1 week ago View Original

KUALA LUMPUR: Malaysia's bond market recorded a robust net foreign inflow of RM6.6bil as compared to a net outflow of RM3.6bil in the previous month, on the back of investor interest in Malaysian government securities (MGS) and government investment issues (GII).

According to RAM Ratings the inflow in August was largely concentrated in the second half of the month, coinciding with the appointment of the ninth prime minister on Aug 22.

"The market may have taken comfort in the swift resolution of the political quagmire, as the 10-year MGS yield fell 4 bps while the ringgit appreciated sharply against the USD from 4.24 to 4.17 towards the end of August," it said in a note issued on Wednesday.

On outlook, RAM expects the present favourable yield spread of MGS over UST of 190 to 200bps to continue to drive foreign interest in the near term.

Longer term, the monetary policy stance of central banks in developed markets remains a key driver of fund flows, it said.

RAM noted that the US Fed maintained at the Jackson Hole Symposium on Aug 27 that it is in no hurry to raise rates.

It said the upcoming Federal Open Market Committee meeting from Sept 21-22 where the Fed will release its latest “dot-plot” projections, is a crucial market watch on future rate direction.

Meanwhile, the European Cental bank on Sept 9 decided to moderately reduce the pace of its asset purchase programme in 4Q 2021, although it said its action did not amount to tapering.

"All said, rate hikes may likely still be some way off, although markets may price in these expectations sooner," said RAM.

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