KUALA LUMPUR: Foreign investors made a strong return to Malaysia's capital markets in July, reversing the course of the nation's foreign portfolio flows to a net inflow of RM9.1 billion from RM0.6 billion net outflow in June.
It also marked the biggest monthly non-resident portfolio inflows in a year, UOB said today.
Partly benefiting from robust foreign capital inflows, Bank Negara Malaysia's foreign reserves rose for the third straight month by US$0.9 billion month-on-month (MoM) to a six-month high of US$114.7 billion as of end-July.
Nevertheless, Bank Negara's net short position in foreign exchange (FX) swaps increased by US$1.1 billion MoM to a new record high of US$28.0 billion, which was equivalent to 24.6 per cent of FX reserves in June.
UOB said despite recent global market turmoil and heightened geopolitical tensions in the Middle East, Malaysia's economic and financial fundamentals remain sound.
"Our baseline scenario for the global economy continues to expect a soft landing with US Fed starting its easing cycle at a measured pace in September, Bank of Japan riding on a limited normalisation path while China's economy stays supported."
The bank added that given Malaysia's strong growth prospects, continuity of structural reforms and ongoing efforts by the government and Bank Negara to encourage two-way flows and conversion of foreign income offer further upside for incoming investments and capital flows.
Thus, this will improve the ringgit outlook going into the second half of 2024 and 2025.