KUALA LUMPUR (April 9): Foreign portfolio inflows into Malaysia surged to a 10-month high in March, driven by strong demand for government and private debt securities, even as geopolitical tensions in the Middle East continued to cloud the global economic outlook.

According to UOB Global Economics & Markets Research, foreign funds swung to a net inflow of RM6.1 billion in March, reversing a RM2.3 billion outflow in February and marking the strongest monthly inflow since May 2025.

The inflows were driven entirely by debt instruments, with foreign investors buying RM6.1 billion worth of Malaysian debt securities, while equities saw marginal net foreign selling of RM40 million.

Within the debt segment, purchases were led by Malaysian Government Securities (MGS), which recorded net inflows of RM5.1 billion, followed by private debt securities and sukuk at RM2.8 billion. These more than offset continued foreign selling in Government Investment Issues (GII) and Treasury Bills.

For the first quarter of 2026, cumulative foreign portfolio inflows stood at RM5.8 billion, supported by RM4.6 billion in debt inflows and RM1.2 billion into equities.

Meanwhile, Bank Negara Malaysia’s international reserves declined for the first time in a year, falling US$1.7 billion month-on-month to US$126.6 billion as at end-March. Despite the decline, the reserve level remains sufficient to finance 4.6 months of imports of goods and services.

UOB said Malaysia continues to benefit from its relative macroeconomic resilience and policy stability amid heightened global uncertainty.

“The protracted Middle East conflict is likely to keep reflation risks elevated and weigh on global growth, which may prompt investors to reallocate portfolios toward lower-risk markets such as Malaysia,” the research house said.

It added that the ringgit could remain supported should the inflows be sustained, noting that the local currency strengthened to 3.9760 against the US dollar on April 8, from 4.0498 at end-March.

Still, UOB cautioned that foreign portfolio flows are likely to remain volatile in the months ahead, as investors remain sensitive to global inflation risks, monetary policy expectations and developments surrounding the temporary ceasefire in the Middle East.