KUALA LUMPUR (May 2): Foreign investors returned to Malaysian bonds in April this year, bringing in RM2.8 billion in net inflows to the capital markets, even as they pulled RM4.7 billion from equities, according to MARC Ratings Bhd.

In a statement, MARC said the rebound in the ringgit, helped by a 90-day pause on new US tariffs and a weaker US dollar, along with stronger regional currencies, boosted investor sentiment and drove renewed interest in Malaysian assets.

Government bond yields fell across the board, especially in short- to medium-term tenures, which MARC said indicates strong demand for bonds amid global economic uncertainty and expectations of lower interest rates.

However, secondary market activity slowed as investor risk appetite weakened. Corporate bond spreads widened, especially for AA and A-rated bonds, reflecting greater caution. In contrast, sovereign and high-grade bonds remained in favour.

On inflation, MARC expects upward pressure due to the recent minimum wage hike and upcoming RON95 fuel subsidy changes, though inflation stayed low at 1.4% in March.

Malaysia’s economy is expected to grow 4.4% in 1Q2025, slightly down from 5% in the previous quarter, due to weaker mining and manufacturing, though domestic demand remains strong.

MARC added that central banks and investors are taking a cautious approach during the 90-day tariff review period, as US policy remains unpredictable.