Domestic financial markets improve as risk aversion starts to ease

KUALA LUMPUR: Domestic financial markets improved last month as risk aversion eased following continued large-scale global monetary and fiscal stimulus efforts, said Bank Negara Malaysia.

The central bank said in its monthly highlights there were signs of easing of restrictions imposed to contain the Covid-19 pandemic globally.

Nevertheless, it said sentiments remained driven by lingering uncertainties surrounding the implications of the pandemic on global growth outlook.

“Amid this recovery in sentiments, domestic financial markets broadly improved, in line with developments in regional financial markets.

“The FTSE Bursa Malaysia KLCI increased by 4.2 per cent, while the 10-year Malaysian Government Securities yield decreased by 49.2 basis points, amid support from domestic institutional investors,” it said.

However, the ringgit depreciated by 0.5 per cent against the US dollar mainly due to non-resident portfolio outflows.

Bank Negara also pointed out that banks maintained sufficient liquidity to support intermediation and meet exigent needs.

“Banking system liquidity coverage ratio edged higher to 144.0 per cent last month versus 141.4 per cent in March.

“Annual growth in deposits accepted from individuals rebounded to 6.2 per cent, the strongest since January last year. The loan to fund ratio and the loan to fund and equity ratio stood at 82.5 and 71.8 per cent, respectively,” it said.

Meanwhile, headline inflation declined to -2.9 per cent last month from -0.2 per cent in March, on the back of lower retail fuel prices and the six-month electricity tariff discount beginning April 1.

Underlying inflation, as measured by core inflation, also remained stable at 1.3 per cent, said Bank Negara.

Exports contracted by 4.7 per cent in March versus 11.8 per cent growth in February due to fall in exports of manufactured goods and commodities.

“Looking ahead, exports are expected to remain weak due to lower global demand following the Covid-19 pandemic and low commodity prices,” said the central bank.