The foreign exchange reserves fell by US$0.6bn or RM2.0bn in 2H May to US$95.5bn or RM312.2bn as at 31 May, compared with an increase of US$0.1bn or RM0.3bn in 1H May. This suggests that the repatriation of export proceeds was offset by some outflow of foreign portfolio funds and payment of import bills. As it stands, the foreign portfolio investment in fixed income papers slowed down to RM8.5bn in April, from +RM12.9bn in March and we expect it to fall in May. The increase pushed up total holdings in fixed income instruments by foreign portfolio investors to RM93.7bn at end-April, the highest in 21 months and from RM85.2bn at end-March (Chart 1). At the current level, the foreign exchange reserves are sufficient to finance 8.3 months of retained imports and cover 4.4 times the shortterm external debt of the nation, compared with a high of 10.0 months of retained imports and 4.3x of short-term external debt cover as at end-February.
Economic Highlights - Foreign Exchange Reserves Fell To US$95.5bn As At 31 May - 8/6/2010
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