Foreign investors piled into MGS as US rate hike fears wane

Published on 16 Aug 2023.

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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. Both the equity and bond markets saw keener foreign buying activity. The overall foreign inflow into the bond market more than doubled m-o-m to RM11.3 bil (June: RM5.2 bil) – 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 bil 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%, the lowest since March 2021. Since a further 25 bps rate hike on 26 July, the Fed appears to be less hawkish, raising market bets that it may not follow through with the last 25 bps hike FOMC members projected for this year. The stronger demand saw the benchmark 10-year MGS yield falling 4.8 bps m-o-m to 3.84% as of end-July while the ringgit appreciated to 4.54 against the USD (end-June: 4.68). As at 15 Aug, 10-year MGS yield stood at 3.88% while the RM/USD was 4.63.

 

Analytical contact Woon Khai Jhek, CFA (603) 3385 2512 khaijhek@ram.com.my

Media contact Hazli Halini Johari (603) 3385 2542 hazli@ram.com.my

 

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