Foreigners net sellers of debt securities for second month

KUALA LUMPUR: Foreigners were net sellers of Malaysian debt securities for the second month, selling a staggering RM12.9 billion last month, compared with RM4.7 billion in April.

This was the biggest drop since the record RM26.2 billion decline in March last year.

Kenanga Investment Bank Bhd said the outflow slashed foreign holdings in Malaysian debt securities from 15.2 per cent in April to 14.2 per cent last month, the lowest since June 2010.

“Investor sentiment was rattled by the unprecedented outcome of the 14th General Election and by the subsequent news flow on the Pakatan Harapan government’s policy decisions.

“External factors were also less encouraging as the United States growth indicators pointed north, suggesting a more hawkish US Federal Reserve.

“Along with rising global trade tensions, demand for the emerging markets bonds as a whole weakened in May,” it said in a report yesterday.

The month’s sell-off was broadbased across both short-dated and long-dated securities. Shortdated securities registered the largest outflow in 14 months of RM2.3 billion, compared with RM638 million in April.

The 26.1 per cent decline in foreign fund flows last month led to foreign holdings of total shortdated Malaysian bonds sliding to 53.9 per cent from 60.4 per cent in April. Similarly, foreign holdings of long-dated securities recorded the largest outflow in 14 months of RM9.8 billion.

Meanwhile, the average yield gap between the benchmark US 10-year Treasury yields and the local 10-year Malaysian Government Securities bond yields widened to 120 basis points from 116 basis points.