KUALA LUMPUR: Malaysia's bond market sees net foreign inflows, after two consecutive months of outflows, as investors return to emerging markets amid easing inflationary fears.
MARC Ratings Bhd said the local bond market logged net foreign inflows of RM5.6 billion last month, from a net outflow of RM3.5 billion in July.
All segments registered net foreign inflows, the firm said in a statement today.
Malaysian Government Securities (MGS) led with RM3.5 billion, followed by Malaysian Islamic Treasury Bills (MITB) at RM1.8 billion.
Corporate bonds registered net foreign inflows amounting to RM69.0 million from RM187.1 million outflow in July.
Consequently, MARC said total foreign holdings as a percentage of total local bonds outstanding had risen slightly to 13.9 per cent in August from 13.7 per cent in July.
As at end-August, the firm said the share of foreign holdings in MGS, Malaysian Treasury Bills (MTB) and MITB all stood higher while that of Government Investment Issues (GII) fell slightly.
The foreign holdings of corporate bonds remained unchanged from the previous month at 1.6 per cent.
Year to date, cumulative foreign flows into the local bond market improved in August, thanks to the RM5.6 billion of net foreign inflows, though it continued to be in negative territory.
Total MGS/GII outstanding expanded to RM965.7 billion from RM958.8 billion in July amid lower redemptions (August: RM8.6 billion; July: RM19.0 billion).
MARC said the increase was driven by the MGS segment, which saw issuances surge to RM10.0 billion from RM5.0 billion in July.
GII issuances, meanwhile, went the other direction, falling 47.6 per cent (August: RM5.5 billion; July: RM10.5 billion).
Local govies ended August on a mixed note, with the second quarter 2022 gross domestic product upside surprise and Fitch Ratings' comment that strong economic performance may facilitate fiscal consolidation seemingly having little impact, MARC said.
"Strong foreign buying interest was seen in the front end following slower-than-expected July inflation in the United States (US), which helped ease market concerns over US Fed hawkishness.
"As a result, three years MGS yield shed 17 basis point month on month to settle at 3.34 per cent. Some intermediates to long-term MGS, on the other hand, saw some profit taking after the previous month's gains," it added.