KUALA LUMPUR: Malaysia received RM21.3 billion of foreign portfolio inflow in 2023, overturning the outflow of RM5.5 billion in 2022.
According to SG-UOB Global Economics & Markets Research, this was despite portfolio flows losing traction in December 2023 to a net ouflow of RM1.9 billion from a net inflow of RM6.9 billion in November 2023.
This came as foreign investors turned net sellers of Malaysian debt securities last month, selling RM2.1 billion versus buying RM5.4 billion in November 2024.
This fully offset the persistent inflows in Malaysian equities (+RM0.3 billion in December vs +RM1.6 billion).
Bank Negara Malaysia's foreign reserves recovered further by US$2.1 billion month-on-month to US$113.5 billion as at end-December 2023, after taking into account the quarterly foreign exchange revaluation changes.
The research unit said capital flows are expected to be continuously subjected to volatility in the near term, particularly due to the market pricing of US Federal Reserve (Fed) cut rates following key data releases and Fed official comments as the year progresses.
Geopolitical events such as Middle East tensions and elections in several major economies will further add volatility in the global and regional capital markets this year.
Having said that, favourable economic fundamentals, disinflationary momentum and the prospect of a weaker US dollar, owing to less restrictive US monetary policy, will spare emerging markets including Malaysia from hefty capital outflows.
It could in fact help the region to see an improvement in their capital flows albeit moderately in 2024.