FW: FI Research -Uptick in foreign holdings

 

Dear Readers,   Highlights of the report as follow:-

·         In September, foreign holdings of total local debt expanded by RM9.3bil to RM200.1bil. As a percentage of total debt outstanding, foreign holdings rose from 15.6% in June to a seven-month high of 17.6% in August. ·         Foreign holdings in MGS improved to 42.8% compared to 40.3% in August, its highest percentage share since February 2017. Holdings of MGII also recovered to RM18.5bil or 7.0%. However, foreign demand for PDS moderated to 2.97% at RM16.9bil in July from 3.04% at RM16.8bil in August. ·         As markets continue to price in a US December rate hike, commencement of ECB QE tapering in 2018, and strong economic growth projected at 5.7%–5.9% in 2017, easing inflation and healthy reserves which is currently at US$101.2bil as at end-September, we believe these will continue to entice liquidity into Malaysia. ·         Hence, we are maintaining our 10-year MGS yield projection of around 3.95%–4.00% by end-2017 from 4.235% end-2016, with the ringgit poised to average around 4.31–4.33 against the USD. We are also still expecting UST yields to hover around 2.40%–2.50% end-2017 as we are maintaining our three-rate hike view for 2017 with the final rate hike in December.