Tariff tensions trigger RM2.8bil bond inflows in April, says MARC
KUALA LUMPUR: Rising global trade tensions have driven foreign investors toward safer assets, fuelling bond inflows into Malaysia despite persistent equity outflows, according to MARC Ratings Bhd.
In its latest monthly review, the ratings agency said foreign investors withdrew RM4.7 billion from equities, but this was offset by RM2.8 billion in net inflows into the bond market.
Yields on Malaysian Government Securities declined across the curve, with sharp drops in short- to medium-term tenures reflecting strong demand for bonds amid dovish global monetary expectations and tariff-related uncertainty.
MARC said corporate credit spreads widened, signalling a shift in preference toward sovereign and high-grade bonds. Risk appetite in the secondary market also faded.
Globally, the US Dollar Index fell below 100 amid concerns over US President Donald Trump's trade policies and expectations of Federal Reserve rate cuts.
While US Treasury yields climbed on inflation fears and retaliatory selling, equity markets lost momentum.
"Despite maintaining a broadly dovish bias, central banks and global markets are adopting a cautious wait-and-see approach during the current 90-day tariff review, as Trump's policy actions are likely to remain unpredictable," MARC said.
Domestically, Malaysia's economy is expected to grow 4.4 per cent in the first quarter of 2025, down from 5.0 per cent in the previous quarter due to weaker mining and manufacturing activity.
However, domestic demand, services and construction remained firm.
Inflation stayed subdued at 1.4 per cent in March, but MARC flagged upside risks from the recent minimum wage hike and the upcoming RON95 fuel subsidy rationalisation.
Exports rose 6.8 per cent in March, driven by electrical and electronics, palm oil and machinery shipments to the US, Hong Kong and Singapore.
Despite this, MARC warned that exposure to new US tariffs would pose risks, though countries could mitigate this through ongoing supply chain diversification.
The ringgit, which initially weakened after the US tariff announcement, rebounded in April on improved regional sentiment, broader US dollar weakness and a 90-day pause on tariff implementation.
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