Photographer: Brent Lewin/Bloomberg

Global Funds Raise Malaysian Bond Holdings as Ringgit Rallies

  • Foreign ownership climbs 3.8% in October from month earlier
  • Inflows may not be repeated if Fed hikes rates in Dec.: ANZ

Global investors raised holdings of Malaysian bonds in October to the highest level since June as the ringgit posted its first monthly gain in six months.

Overseas ownership of the nation’s government and corporate debt climbed 3.8 percent to 209.7 billion ringgit ($48.7 billion), the central bank reported Friday. The currency rallied 2.3 percent in October as bets for a U.S. interest-rate increase were pushed back.

The ringgit is still Asia’s worst-performing currency this year as foreign investors sold Malaysian assets amid a slump in oil and a political scandal involving Prime Minister Najib Razak. Global funds have pulled 17.5 billion ringgit from equities and 16.2 billion ringgit from debt in 2015. The inflows could reverse if the Federal Reserve raises borrowing costs in December, according to Australia & New Zealand Banking Group Ltd.

“Despite the inflows, the dollar-ringgit continues to struggle to hold on to any dips, and keeps gravitating toward the 4.30 level,” said Khoon Goh, a Singapore-based senior currency strategist at Australia & New Zealand Banking Group. “If the inflows in October were mainly due to the market pushing expectations of Fed hikes into 2016, then the increased odds of a December rate hike mean we are unlikely to see a repeat of October’s inflows.”

Malaysia’s five-year sovereign bonds dropped this week, with the yield advancing five basis points to 3.78 percent, prices from Bursa Malaysia show. It declined seven basis points in October. The 10-year yield was steady at 4.13 percent.

The ringgit fell 0.3 percent to 4.3075 a dollar as of 2:54 p.m. in Kuala Lumpur and is down 0.2 percent for the week, according to prices from local banks compiled by Bloomberg. The currency has weakened 19 percent in 2015 and reached a 17-year low of 4.48 in September.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE