KUALA LUMPUR: Foreigner investors continued the buying spree of Malaysia's stocks and debt securities in August, with net foreign buying of RM11.5 billion (Jul: RM9.1 billion).
UOB Global Economics & Markets Research said, this marks the second straight month of record buying so far this year and the highest foreign portfolio inflows since last July.
The firm attributed this to an expected US Federal Reserve rate cut in September and strong domestic gross domestic product (GDP) performance in the second quarter of 2024 that led to upgrades in Malaysia's growth outlook.
Individually, non-resident purchases of equities rose further to a 29-month high of RM2.5 billion last month (July: +RM1.3 billion) and of debt securities reached RM9.0 billion (July: +RM7.8 billion).
Year-to-date as of August, foreign net purchases of Malaysian equities were RM3.0 billion (January-August 2023: -RM2.6 billion) while debt securities purchases totalled RM17.7 billion (January-August 2023: +RM27.4 billion).
The higher foreign portfolio inflows lifted Bank Negara Malaysia (BNM)'s foreign reserves by US$2.1billion month-on-month (m/m) to US$116.8 billion as at end-August, the highest level since December 2021.
BNM's net short position in foreign exchange (FX) swaps rose for two months in a row by USD1.3 billion m/m to a new record high of US$29.3 billion, which was equivalent to 25.5 per cent of FX reserves in July.
UOB said expectations for loosening of US Fed monetary policy will help navigate reallocation of global flows towards Asia emerging markets given macro resilience in the region.
"Broader monetary easing across the advanced economies will provide scope for regional central banks to loosen their monetary policies that can help stimulate demand and support growth," it said.
UOB said the exception would be BNM, as it continue to signal an extended pause in the Overnight Policy Rate (OPR), which it expects to stay unchanged through 2024 and 2025.