Malaysia: No alarm bells yet on inflows into Malaysia – 12 Jun 2017

  • That foreign investors are expected to pour about USD1tr into emerging markets (EMs) in 2017 has not yet set the alarm bells ringing of a potential bubble in Malaysia.
  • Non-resident capital inflows to EMs should reach USD970bn in 2017, a 35% increase from 2016 and is expected to rise to more than USD1tr in 2018, the first time inflows breached that level since 2014, said Reuters, quoting a report from the Institute of International Finance (IIF).
  • “The inflows into emerging markets are supported by better macro prospects, improved external balances and progress made in policy reforms,” said Lee Heng Guie, executive director, Socio Economic Research Centre.
  • “Malaysia is no exception. It saw sustained net foreign buying of equities, attracted by positive macro and corporate earnings drivers such as still high gross domestic product growth, strong rebound in exports, ongoing and new infrastructure spending, potential upside in the ringgit and positive sentiment in global markets,” Lee added.
  • Despite the rebound in foreign capital inflows from foreigners, overall net capital outflows are expected from EMs, led by resident capital outflows from China, said Reuters.
  • Capital outflows are expected to hit USD892bn in 2017, a decline by USD141bn from 2016, and to be reduced further in 2018. Outflows from China alone, which leads EM economies in capital leaving local markets, rose to a record USD725bn in 2016.
  • Overall net capital outflows, which includes resident and non-resident flows from EMs, are expected at USD130bn.

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