Malaysia: FX Reserves increased in December – UOB

Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group review the latest FX reserves figures in the Malaysian economy.

Key Takeaways

“Malaysia recorded foreign portfolio outflows for a fourth consecutive month in Dec (at -MYR2.4bn vs -MYR1.3bn in Nov), taking the full-year non-resident portfolio outflows to MYR5.6bn in 2022 (2021: +MYR30.4bn). Dec’s foreign portfolio outflows were broad based, led by Malaysian equity outflows of MYR1.5bn (Nov: -MYR0.3bn) against Malaysian debt securities outflows of MYR0.9bn (Nov: -MYR1.0bn). However, the 2022 full-year non-resident portfolio outflows of MYR5.6bn were solely driven by debt outflows (-MYR9.8bn) as the equities segment recorded cumulative inflows of MYR4.2bn last year.”

“Bank Negara Malaysia (BNM)’s foreign reserves posted the largest monthly gain in 16 months by USD4.9bn m/m in Dec to end the year of 2022 at USD114.6bn (end-Nov: +USD4.5bn m/m to USD109.7bn). The latest reserves level has considered the quarterly foreign exchange revaluation changes. It is sufficient to finance 5.2 months of imports of goods and services and is 1.0 time of the total short-term external debt.”

“Going forward, we expect financial market’s volatility to persist but the prospects of foreign buying interest returning to emerging market (EM) assets have somewhat brightened following China’s reopening from 8 Jan 2023. The current market expectations for the US Fed reaching the peak of its interest rate hike cycle by 1Q23 alongside a continuation of China’s economic stimulus and consensus of still positive growth outlook for most Asian countries versus a projected mild recession in major advanced economies have also augured well for EM currencies including MYR.”