Cautious optimism on foreign reserves hitting new highs

KUCHING: Analysts are slightly dovish on news of Bank Negara Malaysia’s ( BNM) international reserves in the two weeks ending March 29, 2019 rising by US$ 0.4 billion to reach US$ 103 billion, its highest level since end September last year.

UOB senior economist Julia Goh saw that overall foreign flows improved to MYR3.8 billion in the first quarter of 2019 (1Q19), mainly lifted by bond inflows which offset equity outflows.

Meanwhile, foreign holdings of Malaysian government bonds stood at RM169 billion or 22.8 per cent of total outstanding as at end of March.

“Some positive catalysts for emerging markets include the dovish shift from the Federal Reserve and more constructive talks between China and the US,” Goh added in her notes yesterday.

“However, Asian currencies continued to drift sideways against the US dollar amid the bearish global outlook.

“The US dollar-ringgit is holding in a tight range of 4.06 to 4.08 as growth risks take center stage.”

Meanwhi le, Af fin Hwang I nve s tment Ba n k Bhd ( AffinHwang Capital) expect Malaysia’s reserves level, which has remained above US$ 100 billion since August 2017, to be supported by the country’s healthy trade balance.

On a cumulative basis, country’s trade surplus widened to RM22.6 billion compared to RM18.7 billion in the corresponding period in 2018.

“Despite the decline in exports in February of 5.3 per cent, we believe demand for Malaysia’s manufactured goods especially E& E exports will continue to support export performance, as reflected by the stable growth of electric and electronic exports,” it stated in its report.

“During our recent visit to Penang, while the technology companies are generally excited about 5G as it will not only drive offtake of existing products (especially those relating to data infrastructure, radio frequency and sensors) but also lead to the creation of new products; the consensus was that more clarity and meaningful positive impact could only be seen in 4QCY19 to 1QCY20, consistent with our view.

“Addit ional ly, Bloomberg reported that a major North American smartphone maker, which has great influence over the prospects of semiconductor companies in Malaysia, is planning to sit out 5G until at least 2020.”

Overall, the research arm believed that in essence, a ‘soft launch’ of 5G in 2019 will be of little help to RF content growth for Malaysian semiconductor companie s , whi le rapid adoption of the new technology from 2020 onwards should reinvigorate the semiconductor industry.