Malaysian bond outflows may prove short-lived after rate cut
Bank Negara Malaysia (BNM) lowered borrowing costs for the first time in five years on Wednesday (July 9), calling it a 'preemptive measure' in the face of growing risks for the Southeast Asian nation's economy. The move came after foreign investors sold a net US$676 million (RM2.87 billion) last month, following three months of inflows, data from BNM show.
A shift to easing underscores policymakers' concerns about the fall-out of recent US tariffs on Malaysian goods, which were raised to 25% this week. That could ramp up the pressure on an economy that had suffered three consecutive quarters of slowing growth by the end of March, suggesting more room for monetary easing — and a rebound in bond demand.
The central bank's 'accompanying dovish assessment of downside growth risks from external factors, such as uncertain US tariff policy, could spur bets of further rate reductions,' said Chua Han Teng, a senior economist at DBS Bank. This may result in the 'returning of foreign portfolio inflows into Malaysia's government debt securities, reversing the temporary outflows in June 2025'.
Still, market watchers will be monitoring whether the outflows persist amid evolving global risk sentiment, US trade policy developments, and the uncertainty about Malaysia's growth outlook, said Shier Lee Lim, a FX and macro strategist at Convera in Singapore. 'At this stage, the market remains focused on these drivers, and flows could remain sensitive to shifts in the external environment.'
June's bond selloff was mainly driven by cooling bets on ringgit gains, according to BNP Paribas. The currency has risen 5% against the dollar this year, partly the result of firms being encouraged by authorities to repatriate overseas income.
Malaysia's bonds still have some appeal, with foreign holdings of Malaysian bonds likely 'rising in the medium- to longer term,' according to Winson Phoon, head of fixed income research at Malayan Banking Bhd in Singapore. Value in the short-end appears fair and returns are seen towards the 30-year part of the curve, he added. –BLOOMBERG
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
35 minutes ago
- The Star
Debt market jitters signal caution for high-flying stocks
A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Wednesday, July 28, 2021. - Photographer: Michael Nagle/Bloomberg LONDON: Investors are backing out of or taking active bets against high-priced corporate credit, where they anticipate a correction in response to signs of slowing economic growth that could eventually impact stocks. In interviews and client research, global asset managers and some of the world's biggest banks cautioned that credit pricing had reached levels consistent with a much stronger economic outlook than official forecasters anticipate for this year. 'We've turned very defensive in terms of developed-market credit,' said Mike Riddell, lead portfolio manager for strategic bond strategies at Fidelity International. 'We have zero exposure in terms of cash bonds and are short high-yield,' he added, referring to the use of derivatives products to bet an asset class will perform badly. The spread that measures the premium corporate bonds pay in interest over government debt, the main valuation metric for credit, dropped to just one basis point above its 1998 low on Jul 29, Reuters analysis showed. Markets are rallying worldwide, with European stocks hitting their biggest weekly gain since late April and Wall Street indices close to record highs, but investors and analysts said credit was the strongest example of exuberance. As US economic data softens, investors said corporate credit was most vulnerable to a sustained slowdown in the world's largest economy that could hit global growth, with equities likely to fall in turn. Before 2018's US-China trade war slump, 2022's rate rise rout and a similar shake-up in late 2023, a popular exchange-traded fund tracking high-grade corporate credit fell some time before world stocks. Stuart Kaiser, head of US options strategy at Citi, said the bank's derivatives desks had in the last few weeks begun seeing significant demand from asset-manager clients for products that bet against the performance of that iShares index or gauges of junk bonds. 'It is probably macro investors taking a directional view or putting on a hedge against the rally we've seen in risk assets,' he said. 'The fact people are now hedging credit risk tells you they see reasonable downside to equity markets over the next three months.' Florian Ielpo, Lombard Odier Investment Managers' head of multi-asset, said credit was 'leading the market' already, based on shifts he had spotted under the surface of headline pricing. According to his own analysis of global credit indices, he said, the proportion of business bonds where spreads were still narrowing had fallen abruptly from 80% to 60% in the five days to Aug 4. 'This is a significant move in the data and one you cannot ignore,' Ielpo said, because it was not usual. — Reuters
BusinessToday
an hour ago
- BusinessToday
Bangladesh Eyes Proton EVs For Local Distribution
Proton Holdings Bhd's electric vehicle manufacturing has drawn interest from Bangladesh which is seeking to secure investment from the Malaysian national carmaker. Attracting investment by Malaysian companies across various sectors figures prominently on the agenda of Bangladesh interim government chief adviser Muhammad Yunus during his three-day Malaysia visit, which starts today. 'They produce a lot of cars. During the visit, Bangladesh will invite Proton Holdings to invest here,' Yunus's press secretary Shafiqul Alam said at a media briefing in Dhaka yesterday, according to a Bangladesh Sangbad Sangstha report. He was referring to the Malaysian automaker's electric vehicle (EV) push in his remarks. The company launched its first-ever electric vehicle, the Proton 7, in December 2024, and is holding a tour of key Malaysian cities between August and October to preview the Proton 5, the second car in the EV will also explore Malaysia's involvement in deep-sea fishing. 'We catch Hilsa and other marine fish within 40 to 50 kilometres of the deep sea. However, our maritime boundary is about 210,000 square kilometres,' Shafiqul Alam said. Yunus, whose trip is being undertaken at the invitation of Malaysian Prime Minister Datuk Seri Anwar Ibrahim, is accompanied by foreign affairs adviser Mohammad Touhid Hossain, expatriate welfare and overseas employment adviser Asif Nazrul and power, energy and mineral resources adviser Fouzul Kabir Khan. The national security adviser Khalilur Rahman, special envoy to the Chief Adviser on international affairs Lutfey Siddiqui and Bangladesh Investment Development Authority (Bida) executive chairman Chowdhury Ashiq Bin Harun are also part of the delegation.
Malaysiakini
2 hours ago
- Malaysiakini
Malaysia in a shifting world order
COMMENT | The global geopolitical landscape is undergoing a seismic shift. For decades, American dominance economically, militarily, and diplomatically has defined the post–Cold War international order. Today, that dominance is increasingly challenged by emerging powers and shifting global alignments. The rise of competing powers, growing distrust of US intentions, and the resurgence of nationalist economic policies, particularly under Donald Trump's second term, are accelerating the fragmentation of global power. In place of a US-led unipolar order, a multipolar world is emerging, one increasingly defined by the rivalry between the United States, an emerging axis of Russia-China-India (RCI), and a recalibrated European Union. Trump's recent moves to impose tariffs on a wide swath of countries, including traditional allies like the European Union, Canada, South Korea, and India, mark a decisive...
