Foreign investors remain significant net buyers in 1H25, contribute net inflow of RM21.4bil
However, foreign holdings of Malaysian bonds eased to RM5.4 billion in June, reversing strong inflows of RM13.4 billion recorded in May, amid weaker investor sentiment due to US tariff uncertainty.
"This was primarily driven by selloffs of both long-term Malaysian Government Securities (MGS) and Government Investment Issues (GII), as well as short-term Malaysian Treasury Bills (MTB) and Malaysian Islamic Treasury Bills (MITB), which respectively amounted to RM5.3 billion and RM1 billion.
"Conversely, corporate bonds continued to attract foreign investments, which posted a net inflow of RM903.4 million (May: RM550 million),' it said in a statement.
The credit rating agency said, however, that this was only the second month in 2025 to see an overall net foreign outflow, after February's RM1.1 billion.
Furthermore, it said foreign investor interest could stay muted in July as the Aug 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 the 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 the policy rate unchanged at 4.25-4.5 per cent at the upcoming July Federal Open Market Committee meeting,' RAM Ratings added.
RAM Ratings said waning hopes of a Fed rate cut this month strengthened the greenback. As of July 17, the ringgit weakened moderately to 4.25 against the US dollar (end-June: 4.21). - Bernama
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