PETALING JAYA: The persisting negative spread between Malaysian Government Securities (MGS) and US Treasuries may reverse if the world’s largest economy’s growth expectations begin to moderate.
At the moment, however, MARC Ratings Bhd said the negative spread continues to favour US assets. This has resulted in continued capital outflows from Malaysia, amid global uncertainties.
In February, net foreign outflows totalled RM1.7bil in bonds and RM2.2bil in equities, as investors became more risk-averse amid escalating geopolitical tensions and trade-related uncertainties.
Meanwhile, MARC Ratings also noted that secondary market activity remained solid, although it has eased slightly from previous highs.
In a statement yesterday, MARC Ratings said there are signs that the US Federal Reserve (Fed) is turning more dovish.
Notably, the Fed announced a slowdown in the pace of its balance sheet reduction.
As a result, the ringgit has remained relatively stable in March, supported by expectations of narrowing interest rate differentials between Malaysia and the US.
The ratings agency pointed out that the ringgit has traded within a stable range, bolstered by Malaysia’s resilient economic fundamentals and steady investor confidence.
This currency stability reflects optimism around the country’s macroeconomic outlook and policy direction. “Malaysia’s exports surged by 6.2% in February, rebounding strongly from 0.3% in January.
“The increase was driven by an 8.8% rise in manufacturing output and an impressive 18.1% growth in the electrical and electronics sector.
“This recovery aligns with an improved purchasing managers’ index, which climbed to 49.7 in February from 48.7 in January, indicating a rebound in demand,” according to MARC Ratings.
Regional trade shifts linked to US tariff policies also contributed to the export momentum. As for price pressures, headline inflation eased to 1.5%, while core inflation inched up slightly to 1.9% in February.
“Despite persistent global headwinds, Bank Negara held the overnight policy rate steady at 3%. The central bank projected gross domestic product growth of between 4.5% and 5.5% for 2025,” it said.
