PETALING JAYA: Foreign holdings of ringgit-denominated debt securities rose to a record RM325.5bil in October, with holdings of conventional private debt securities (PDS) more than doubling from end-2025 to RM29.6bil and holdings of private sukuk rising to RM11.2bil, according to UOB Kay Hian (UOBKH) Research.
UOBKH Research said PDS, including private sukuk, accounted for 12.5% of foreign holdings of ringgit debt, up from 7.2% at end-2025.
“That makes the holder base less concentrated in GII (Government Investment Issues) (12.9% versus end-2025’s 17.3%) and adds exposure to corporate papers,” it said.
UOBKH Research said Malaysia drew RM6.3bil in net foreign portfolio inflows in October, reversing RM3.4bil in outflows in September.
Debt securities attracted RM7.2bil, while foreign investors sold a net RM900mil in Malaysian equities, their third consecutive month of net selling.
“This helped Malaysia buck the broad sell-off in emerging markets (EMs) as investors cut risk positions particularly in North Asian markets.
“This continues a pattern seen in recent stress episodes.
“Malaysia’s debt drew foreign inflows during the April 2025 tariff shock and the March 2026 Iran war shock, months in which EMs as a whole saw outflows,” UOBKH Research said.
UOBKH Research said foreign investors bought RM5.2bil in conventional PDS and RM4.7bil in Malaysian Government Securities (MGS) on a net basis in October.
They sold RM1.3bil in GII, RM900mil in private sukuk and RM600mil in Treasury bills.
“Individually, foreign ownership of MGS improved to a fresh record high of RM238.2bil (33.1% of total MGS outstanding); while foreign holdings of GII declined further to RM42.0bil (6.5% of total GII outstanding),” it added.
For the first 10 months of 2026, UOBKH Research reported net foreign portfolio inflows of RM17.3bil, compared with outflows of RM4.2bil a year earlier.
Net debt inflows reached RM24.7bil, while net equity outflows narrowed to RM7.4bil from RM20.7bil.
UOBKH Research said Bank Negara Malaysia’s (BNM) foreign reserves rose for the first time in four months, increasing by US$800mil to US$132.6bil at end-Oct.
The central bank’s net short foreign exchange swap position narrowed by US$700mil to US$26.3bil in September, equivalent to 20% of reserves.
“This points to BNM rolling its short positions into the one-to-three-months tenor rather than unwinding them outright,” the research house.
“Looking ahead, capital flows to EMs are expected to remain sensitive to movements in the US dollar and US Treasury yields, geopolitical developments, and uncertainty surrounding the sustainability of the global artifical intelligence investment cycle,” it added.
UOBKH Research projected the ringgit would weaken to RM4.08 against the US dollar by end-2026 and RM4.18 by mid-2027. It cited the prospect of a December US Federal Reserve rate increase widening the gap between US and Malaysian policy rates.
“Key domestic developments to monitor include the upcoming Melaka state election on Nov 14, the Sarawak state election on Dec 12 and the anticipated release of the Johor-Singapore Special Economic Zone blueprint by end-2026, which could influence investor sentiment and capital flow dynamics,” UOBKH Research noted.
