BNM’s international reserves seen steady at US$105b

KUALA LUMPUR: Bank Negara Malaysia’s international reserves are expected to remain steady and hover around US$100 billion to US$105 billion by year end, said Affin Hwang Capital.

It said Malaysia’s reserves level would be supported by sustained trade surplus due to the diversified structure of the country’s exports.

“The reserves level will also be bolstered by the country’s current account surplus amid trade surplus which had widened to RM100.9 billion in the first nine months of the year, compared with RM87.5 billion in the same period last year,” said Affin Hwang in a note.

Bank Negara had maintained its Overnight Policy Rate at three per cent this month and this would provide a “wider interest rate differential” compared with that of the United States Federal Reserve and might attract some fund flows into the local bond market, it said.

“However, we expect potential outflows from the non-resident portfolio due to uncertainties surrounding trade talk developments (between the US and China) following the recommencement of these talks from last month,” it added.

Affin Hwang said Malaysia, which had remained in FTSE Russell’s World Government Bond Index, was still in the watchlist until the next interim review in March next year, and this would possibly hold back some potential inflows from foreign investors.

Bank Negara’s international reserves fell by US$100 million to US$103.2 billion in the two weeks ended Oct 31.

On a monthly basis, the reserves position rose US$200 million to US$103.2 billion.

In ringgit terms, reserves fell RM500 million to RM432.2 billion in the second half of last month, compared with RM432.7 billion as at Oct 15.

The current level of reserves is sufficient to cover 7.6 months of retained imports, unchanged since July.

The reserve coverage of short-term external debt was also unchanged at 1.1 times.