KUALA LUMPUR: Malaysia has seen a gradual return of foreign portfolio inflows totalling RM700 million in May after suffering two consecutive months of outflows, according to UOB Group.
Singapore-based bank said the rebound was driven by small inflows into both debt and equity markets last month.
"It also bucked the portfolio outflow trend in emerging markets amid tighter global monetary conditions and weaker currencies against the US dollar during the month," UOB said.
Year to date as of end-May, Malaysia garnered cumulative foreign portfolio inflows of RM8.4 billion, with debt securities inflows of RM 900 million and equities inflows of RM7.5 billion.
With that, foreign ownership of Malaysian equities inched up to 20.4 per cent of total market capitalisation at the end of May from 20.3 per cent as at end of April.
UOB said almost all types of debt papers attracted foreign buying interest last month, except for Government Investment Issues (GII), which recorded the third straight month of net selling at RM200 million.
"Malaysian Government Securities (MGS, RM500 million) remained the most favourable instrument for non-residents. As such, foreign holdings of Malaysian government bonds (MGS and GII) rose by RM400 million to RM234.0 billion as at end-May," it said.
Meanwhile, UOB said amid non-resident portfolio inflows, Bank Negara Malaysia's foreign reserves were bound for the first time in five months by US$300 million month-on-month (mom) to US$112.8 billion as at end-May.
"The latest reserves position is sufficient to finance 5.7 months of imports of goods and services, and is 1.1 times total short-term external debt," it added.
UOB said emerging markets (EMs) including Malaysia continued to brace for more volatile foreign capital flows amid multiple headwinds on the horizon.
It said brewing recession risks and faster tightening of global monetary policy to fight inflation would lead to more risk-aversion in the near term.
"Three key events to watch for in the coming month include June Federal Open Market Committee (FOMC) meeting (June 14-15), 48th G7 Summit (June 26-28), and Bank Negara Malaysia's monetary policy meeting (July 6)," it added.