KUALA LUMPUR, July 29 (Bernama) -- Bursa Malaysia rebounded to close higher on Wednesday on selective buying of defensive stocks after a volatile trading session. IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said consumer products and services stocks lifted the key index higher, overcoming lingering geopolitical concerns. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 3.08 points to 1,715.56 from yesterday’s close of 1,712.48. The benchmark index, which opened 1.91 points higher at 1,714.39, moved between 1,710.79 and 1,720.59 during the day’s trading. In the broader market, gainers outstripped decliners 550 to 476, while 612 counters were unchanged, 1,129 untraded, and 48 suspended. Turnover rose to 2.96 billion units valued at RM2.48 billion from 2.94 billion units valued at RM2.56 billion on Tuesday.
Malaysian bonds are drawing significant unhedged foreign investments, leading to a strong rally in the ringgit, which is Asia's best-performing currency this year. In August, global funds invested RM8.1 billion in Malaysian government bills and bonds, the largest inflows since July 2023, driven by expectations of ringgit appreciation.
Key Highlights:
Surge in Unhedged Investments: The increased demand for Malaysian bonds has largely been unhedged, which means investors are not taking protective measures against currency fluctuations. This has amplified the ringgit's 6% gain in August as foreign funds flow into the country.
Attractive Returns and Economic Outlook: An unhedged Bloomberg index of Malaysian bonds provided a total return of 9.74% for dollar-based investors this quarter, the highest in emerging Asia, compared to a 1.7% return for a hedged index. Malaysia's improving economic prospects, including stable inflation, adherence to fiscal deficit targets, and political stability, have made it an attractive destination for investors.
Stronger Correlation Between Inflows and Ringgit: There is a growing correlation between foreign inflows into Malaysian debt and the ringgit's performance, suggesting a rise in unhedged investments. Previously, hedged investments, which involve taking bearish positions on the ringgit to protect against currency fluctuations, limited the currency's gains despite net inflows.
Impact of Global and Domestic Monetary Policy: The future of this rally will depend on the actions of the US Federal Reserve and Malaysia's central bank, Bank Negara Malaysia (BNM). While a potential easing by BNM could further support bonds, it is not expected at the upcoming decision, with rates likely to remain unchanged at 3%.
Potential Risks to Continued Inflows: The momentum of foreign investments could slow if US economic data does not support the current dovish expectations for the Federal Reserve, according to Winson Phoon, head of fixed-income research at Maybank Securities.
Malaysia’s bond market continues to benefit from favorable economic conditions and investor sentiment, but the rally's sustainability will depend on both domestic and global economic developments.
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