Bullish trend: Foreigners invested $1.75 billion in Malaysian debt markets, the most in a year. | Photo credit: Reuters
Malaysia is fast becoming a haven in Southeast Asia, with foreign investors flocking to this long-overlooked market as improving growth, a stable government and a rising currency set it apart from its peers grappling with political turmoil.
Foreigners have steadily poured more money into Malaysian debt and stocks this year. In July, as political crises erupted in Thailand and Indonesia, they poured $1.75 billion into Malaysian debt markets – the most in a year.
Kuala Lumpur’s stock market is headed for its strongest annual performance in more than a decade.
The ringgit has been the backbone of this outperformance, analysts say, and Asia’s best-performing currency so far should do even better in 2024 as the Federal Reserve begins to cut rates, increasing the attractiveness of Malaysian bonds.
“It’s been a pretty surprising performance for the currency,” said Leonard Kwan, portfolio manager of T. Rowe Price’s dynamic emerging markets bond strategy. “I think most of the performance returns have come from the currency rather than the bonds.”
Malaysia’s comeback story is based on an economy that grew at the fastest pace in 18 months in the second quarter and a stable political environment since Anwar Ibrahim became prime minister in 2022 after years of turmoil.
Foreigners now hold 20% of outstanding Malaysian bonds, according to central bank data.The ringgit hit an 18-month high against the dollar on Thursday.