KUALA LUMPUR (June 11): Malaysia’s robust foreign portfolio inflows in May, totalling RM7 billion, marked the largest inflows since July 2023, according to UOB Global Economics & Markets Research.

In a macro note on Tuesday, the research house said going forward, it continues to expect a bumpy path for capital flows into emerging markets, including Malaysia.

“This is premised on the uncertain start to the US Fed’s rate cut cycle, lingering geopolitical risks, increasing trade protectionisms and rising concerns about domestic policy reforms.

“Relatedly, the ringgit (MYR) will remain subject to volatility despite the ongoing coordinated measures conducted by the authorities,” it said.

UOB said Bank Negara Malaysia estimated that there is US$6 billion-US$7 billion (RM28.3 billion-RM33 billion) of potential annual income to be converted to help offset negative outflows and to be an active stabiliser for the ringgit.

“A stronger correlation to the Chinese yuan (CNY) would also turn into a tailwind for the MYR as the CNY is widely expected to rebound in 2H24.

“Hence, we project USD/MYR to recover at a measured pace to 4.65 in Q24 and 4.60 in 4Q24, from yesterday (10 Jun)’s closing of 4.7230,” it said.