TRUST DEFICIT IN NAJIB TRIGGERS RUN ON MALAYSIAN BONDS: GLOBAL INVESTORS CUT HOLDINGS TO LOWEST IN 15 MONTHS

KUALA LUMPUR: Global funds cut holdings of Malaysian debt in January to the lowest in more than a year after the ringgit slumped to the weakest since the Asian financial crisis.

Foreign ownership of Malaysian sovereign and corporate notes dropped 1.8% to RM211.7bil from the previous month, the least since October 2015, according to central bank data. They have pulled out a total of RM29.1bil since November.

The outflows from Malaysia contrasts with other emerging markets in Asia, which have seen funds return as the Trump dollar trade unwinds. The ringgit has lost 5.8% since the start of November, the worst performance in Asia after the Japanese yen, with a Bank Negara crackdown on the offshore non-deliverable forwards market deterring investors.

“Investors were cautious but have become less negative,” said Lawrence Lai, Asia rates strategist at Standard Chartered Plc in Singapore. “They were cautious because they were afraid the ringgit would depreciate further but the recent stability in the ringgit helps the sentiment.”

The Malaysian currency sunk to a 19-year low of 4.5002 per dollar in early January, but recovered to record its first monthly gain since August. The yield on 10-year sovereign debt has declined 36 basis points to 4.1% since reaching an eight-year high in November.

– Bloomberg

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