Foreign investors flock to Malaysia in July as US rate hike fears wane: RAM Ratings

KUALA LUMPUR: Foreign investors flocked to Malaysia in July, spurred by growing signs that the US Federal Reserve (Fed) is nearing the end of its rate tightening cycle, said RAM Ratings.

It noted that both the equity and bond markets saw keener foreign buying activity. The overall foreign inflows into the bond market more than doubled month-on-month (m-o-m) to RM11.3 billion (June: RM5.2 billion) - the largest since June 2020 and the seventh successive month of foreign net purchases.

"Bursa Malaysia also recorded a net foreign inflow of RM1.4 billion after 10 consecutive months of net outflows.

"The better investor sentiment and appetite for riskier emerging market assets came on the heels of an encouraging US inflation print release in early July which showed a moderation to 3 per cent, the lowest since March 2021,” it said.

"Since a further 25 basis points (bps) rate hike on July 26, the Fed appears to be less hawkish, raising market bets that it may not follow through with the last 25 bps hike Federal Open Market Committee members projected for this year,” it added.

The rating agency noted that the stronger demand saw the benchmark 10-year Malaysian Government Securities (MGS) yield falling 4.8 bps m-o-m to 3.84 per cent as of end-July while the ringgit appreciated to 4.54 against the US dollar (end-June: 4.68).As of Aug 15, the 10-year MGS yield stood at 3.88 per cent while the ringgit stood at 4.63 per US dollar. - Bernama