Foreign Reserves forecasted to grow to US$144.6 billion

MALAYSIA’S foreign reserve level is likely to rise to a record US$144.6 billion (RM429 billion) by year-end, buoyed by the tidal wave of global capital flows, CIMB Investment Bank says.

“We remain cautiously optimistic about the pace of Malaysia’s reserves accumulation ahead amid the tidal wave of global capital flows,” the bank said.

While private capital inflows remain attracted by Malaysia’s pull factors (favourable growth outlook and higher yield differentials), CIMB warned that the policymakers must remain vigilant over the risks and costs of the unwarranted capital flows.

Malaysia’s foreign reserves rose to US$140.3 billion at end-April from US$139.7 billion as at end-March.

The reserves can finance 9.5 months of retained imports and amount to 4.7 times short-term external debt.

This, said CIMB Investment, defied market expectations of an easing of net foreign buying ahead of the general election.

“The continued foreign buying of domestic equities and bonds runs counter to market expectations of portfolio investors staying on the sidelines in the run-up to the general election,” it said.

Foreign investors were net buyers of Malaysian equities (RM5.3 billion in April versus RM4.7 billion in March) for the fifth month, bringing the cummulative figure for January-April to RM14.2 billion.

Their ownership as a percentage of market capitalisation climbed higher to 24.3 per cent in March from 24.1 per cent in February.

Foreign holdings of Malaysian debt securities stood at RM224.8 billion at end-March (RM218.3 billion at end-February), with 61.4 per cent, or RM138.1 billion, held in Malaysian Government