PETALING JAYA: Foreigners sold a total of RM17.8 billion of Malaysian bonds and equities in March in tandem with the exodus of capital flows from emerging markets amid Covid-19 fears, marking the highest monthly outflow since May 2018.
For the month of March, RM12.3 billion in bonds were sold, bringing cumulative sell-off to RM16.9 billion in the first quarter. Meanwhile, RM5.5 billion in equities were sold, amounting to RM7.6 billion in total foreign equity outflows for the first quarter.
UOB said this brings the overall amount of outflows to RM24.5 billion in 1Q20, which more than offset the inflows of RM12.3 billion in the previous quarter.
“The substantial drop in March’s foreign flows contributed to the 1.8% month-on-month (m-o-m) depreciation in the ringgit against the US dollar last month,“ said the research house in a report today.
Bank Negara Malaysia’s foreign reserves fell US$1.7 billion m-o-m to US$101.7 billion as at end-March, the biggest monthly drop since June 2018, largely due to sharp portfolio outflows in March. The latest foreign reserves position is sufficient to finance 7.7 months of retained imports and is 1.1 times short-term external debt.
However, UOB pointed out that the March sell-off is not as steep as experienced during the worst points of the global financial crisis, likely due to the lower foreign holdings of Malaysian debt and equities prior to the Covid-19 pandemic given cumulative selling of RM53 billion since 2016.
“The Fed’s easing measures in recent weeks have also helped to stabilise liquidity conditions for emerging markets. As such, we do not expect intensified ringgit weakness to play out in the near term unless oil prices suffer another steep decline or yuan depreciates sharply due to economic weakness,“ explained UOB, adding that the US dollar/ringgit hovers at 4.34 at the time of writing.
source https://www.thesundaily.my/business/largest-foreign-selling-in-2-years-seen-in-march-XB2232312
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