PETALING JAYA: Foreign fund inflows are expected to return in the third quarter of the year, driven by China’s Belt and Road Initiative, according to Rakuten Trade.
Its head of research Kenny Yee (pix) said that the boost will come from China’s infrastructure initiative in Malaysia and the Asean region, which includes the East Coast Rail Link (ECRL).
“We envisage China to be the saviour for drawing in foreign funds into the region,” he told reporters at a media briefing today.
According to him, the inflow will hinge on the spillover effect from the proposal to cut reserve ratio requirement (RRR) for China’s banking sector, which currently stands at 14.5% for large banks and 12.5% for smaller institutions. For every 1% cut in China’s RRR, US$120 billion is expected to flow into the system.
In addition, the gradual increase of foreign investors to China’s Morgan Stanley Capital International (MSCI) index from a current weighting of 5% to 20% starting in May 2019 will have a positive impact to Malaysia and the region.
Yee anticipate that this would draw US$80 billion foreign funds into China’s market and this would have a spillover effect on Malaysia and the region on the back of China’s Belt and Road Initiative.
“China is in for a positive ride ahead of its MSCI realignment and prospect of a RRR reduction, and the Asean region will benefit from the spillover effect,” he said.
