Investors will be watching
KUALA LUMPUR: The foreign capital outflow from the Malaysian bond market rose to RM3bil in September, an increase of 25% from August, mainly due to external factors, RAM Ratings said.
It said on Tuesday this was the second consecutive outflow, rising from RM2.4bil in August as the US Federal Reserve raised the Fed funds rate (FFR) by 25 basis points to a range of 2.00% to 2.25%, which was the third hike this year.
“Other than that, the protracted trade dispute between the US and China continues to accentuate global risk aversion and a flight to safety, with September recording a new slew of retaliatory tariffs by both sides,” it said.
On the domestic front, Bank Negara Malaysia held the Overnight Policy Rate steady at 3.25%, as anticipated.
RAM’s head of research, Kristina Fong said the balance of growth and outflow pressures has placed the central bank between a rock and a hard place, as staying put remains the most optimal policy response.
“We expect this stance to be maintained in the foreseeable future as uncertainties still cloud domestic and external growth prospects amid continued global liquidity tightening and geopolitical concerns,” Fong said.
For more concrete fiscal guidance on Malaysia’s debt and the fiscal deficit trajectory, domestic and foreign investors will be watching for news from the tabling of the 11th Malaysia Plan review on Thursday and Budget 2019 proposals on Nov 2.
“Domestic macroeconomic strengths are therefore not expected to entice any significant foreign capital inflows until more clarity emerges,” she said.
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