Foreign investors pull RM5.4bil from Malaysian bonds in June
In a statement today, the rating agency said this was amid weaker investor sentiment over when US reciprocal tariffs will take effect, as the initial deadline looms.
"This was primarily driven by selloffs of both long-term Malaysian Government Securities (MGS) and Government Investment Issues (GII) and short-term Malaysian Treasury Bills (MTB) and Malaysian Islamic Treasury Bills (MITB), which respectively amounted to RM5.3 billion and RM1.0 billion.
"Conversely, corporate bonds continued to attract foreign investments, recording a net inflow of RM903.4 million in June, up from RM550 million in May," it added.
However, RAM Ratings said this is only the second month in 2025 to see an overall net foreign outflow, after February's RM1.1 billion.
It noted that foreign investors remained major net buyers in the first half of 2025 (1H25), contributing to a cumulative net inflow of RM21.4 billion as of June 2025 year-to-date.
Looking ahead, RAM Ratings said foreign investor interest could stay muted in July as the August 1 deadline for higher US reciprocal tariff rates looms and uncertainty remains over whether Malaysia can strike a deal before then.
"Growing expectation of a longer pause in US monetary policy easing, given the hotter-than-anticipated July inflation print, also dulls the attractiveness of emerging market assets.
"Markets currently expect the US Federal Reserve (Fed) to keep its policy rate unchanged at 4.25 per cent to 4.5 per cent at the upcoming July Federal Open Market Committee (FOMC) meeting.
"A rate reduction is now anticipated in September, with the market-assigned probability of a cut rising to 48.3 per cent on July 16, up from around 30 per cent on July 9, according to data from the CME FedWatch Tool," it said.
Furthermore, RAM Ratings also said waning hopes of a Federal Reserve rate cut this month strengthened the greenback.
It noted that as of July 17, the ringgit had weakened moderately to 4.25 against the US dollar, compared with 4.21 at the end of June.
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