KUALA LUMPUR, Jan 29 — Global investor sentiments continued to improve amid expectations for an eventual normalisation of economic activities, following government authorisations on the use of Covid-19 vaccines by major economies, said Bank Negara Malaysia (BNM).

This occurred despite some concerns on the potential slowing down of the global economic recovery, as several major economies introduced additional lockdown measures amid surges in Covid-19 infections in December 2020.

“Consequently, global and regional equity indices recorded gains, reflecting higher investor risk appetite for riskier assets. Similarly, the FBM KLCI increased by 4.1 per cent,” BNM said in its Monthly Highlights — December 2020 report.

The improved investor risk appetite also led to non-resident portfolio inflows into the domestic bond market amid yield-seeking activities by global investors.

As a result, the 10-year of Malaysian Government Securities (MGS) declined by nine basis points and the ringgit appreciated by 1.4 per cent against the US dollar.

Meanwhile, headline inflation was less negative at -1.4 per cent in December 2020 compared with -1.7 per cent in November due to to higher domestic retail fuel prices.

Underlying inflation, as measured by core inflation, remained stable at 0.7 per cent.

For 2020 as a whole, BNM said average headline inflation was lower at -1.2 per cent (2019: 0.7 per cent) mainly reflecting the substantially lower global oil prices.

Core inflation remained positive, averaging at 1.1 per cent (2019: 1.5 per cent).

Banking system asset quality remains healthy despite rising impairments. Gross impaired loans ratio continued to inch upwards, returning to levels comparable to 2019 (December 2020: 1.6 per cent; November 2020: 1.5 per cent).

“Banks continued to set aside additional provisions as a precaution against future credit losses with the total provisions to total loans ratio increasing to 1.7 per cent in December (November 2020: 1.6 per cent),” BNM said.

Net financing continued to expand amid a moderation in total outstanding loan growth (December 2020: 3.4 per cent, November 2020: 3.8 per cent), while outstanding corporate bond growth was sustained at 6.5 per cent (November 2020: 6.7 per cent).

For export growth, it improved to 4.3 per cent in November 2020 (October 2020: 0.2 per cent) due mainly to stronger electrical and electronics (E&E) exports mainly to destinations such as China, Hong Kong and Singapore.

Looking ahead, exports are expected to be supported by the recovery in global growth, continued demand for electronics exports and higher commodity prices.

“Nonetheless, the trade outlook remains contingent on global developments surrounding the COVID-19 pandemic,” BNM added. — Bernama