However, the pace of foreign selling slowed from RM9.8bil in April on the news that Malaysian bonds might lose its eligibility in the FTSE Russell WGBI, it said in a research note on Monday.
“The US-China rivalry probably had affected sentiment, as regional peer Indonesia equally saw weak foreign demand with US$700mil of outflows from Rupiah bonds in May (April: -US$500mil) despite the official results showed a win for President Jokowi,” it said.
Maybank IB Research said by instrument, MGS accounted for most of the outflows (-RM3.8bil) which was not surprisingly due to higher foreign positioning.
It also pointed out there was some foreign selling in GII but not significant at -RM500mil.
Foreign positioning in other debt instruments were still relatively low and did not see much changes in foreign holdings.
The foreign share of MGS and MGS+GII decreased to 35.8% (April: 37.1%) and 21.8% (April: 22.7%), the lowest since November 2011 and December 2010 respectively.
“After the outflow, the total amount of foreign holdings in Ringgit debts declined to RM175.9bil (April: RM180bil).
“Including the RM2bil outflows from domestic equities, overall portfolio flows totalled –RM6.2bil (-April: RM11.2bil). Meanwhile, ringgit was weaker against the US$ with the US$-Ringgit pair rising to 4.19 at end-May from 4.135 at end-April, or a 1.3% loss in value on-month,” it said.
Maybank IB Research said Malaysia’s external reserves declined by US$1.1bil on-month to US$102.3bil (April: US$103.4bil).
Bank Negara’s net short forward position, which is released with a one-month lag, improved slightly to US$14.1bil net short in April (March: US$14.2bil net short).
It also noted that if the forex forward book position remained unchanged in May, net official reserves would amount to about US$88.2bil (April: US$89.3bil).
Regional Foreign Flows (Local Currency Govt Bonds)
Total: Second consecutive month of foreign outflows for regional bonds, with –US$1bil for MGS+GII and –US$700mil for IndoGB, while pending the release of foreign holdings data for KTB and ThaiGB.
IndoGB: Foreigners sold US$700mil of Rupiah bonds in May (April: -US$500mil). Foreign share declined to 37.9% (April: 38.4%). On a year-to-date basis, Indonesian bonds still received net inflows but narrower at +US$4bil.
KTB: May’s data is pending. Foreign holdings increased by +US500mil in April (March: unchanged). Foreign share declined a tad to 14.6% (March: 14.7%). Year-to-date cumulative flows totalled –US$400mil at end-April.
MGS+GII: Outflows of –US$1bil in May (April: -USD1.7bil), the second month in a row. Foreign share of MGS+GII declined to 21.8% (April: 22.7%). YTD cumulative flows turned negative at –US$900mil.
ThaiGB: May’s data is pending. Foreign selling continued in April with a larger outflow of –US$600mil (March: -US$400mil). Foreign share fell to 17.4% (March: 18%). Year-to-date cumulative flows amounted to –US$1.2bil at end-April.
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