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Market Risk

Local financial Market Stayed orderly Albeit Risen Market Stress

Domestic financial markets sustained to be conserved in an organized condition within a

sensitive volatility in the first six months of year 2018. Risk signals of financial market stress

using Financial Market Stress Index (FMSI) measurement showed upwards trend (11.7%) in the

mid-2018, comparing to (8.3%) in 2017. The first months of 2018, investors in Malaysia and

other nations in the region were confronted by external factors such as uncertainties towards

of monetary policy standardization in the US which created commercial tensions, remarkably

top economies and the risks of global geo-economical influence politics. Local uncertain results

of the general election (GE 14) also had effects on the market volatile changes. Net capital

outflows recorded in the first part of 2018 were RM40.9 billion; non-residents net out flows

were RM29.3 whereas residents investing outside countries funded RM11.6 billion of net

outflows in the second half of 2017. Yields amount of Malaysia Government Securities grew

number of 17 and 32 in several years until June 2018, similar to US Treasury Amount of yield.

Government bonds of outstanding held by non-residents declined in last 2017 until the middle

2018 while local investors raised holdings of the government bonds by RM53.4 billion.

Non-residents’ net outflows of Malaysian stock market recorded RM6.8 billion. The effects of

the foreign weakening of the stock market were balanced by local investors with sum of RM6.3

billion. Stock market liquidity continued with stable average bid offer (bid/ask price) at 0.4% in

the second half of 2017. From March 2017 to the mid-2018, Malaysian ringgit was stronger

than the US dollar by rate of 5.3% and the market noted sound day-to-day average foreign

exchange transaction of the USD despite dollar has strong influence on the currencies of region
Financial institutions sustained vigorously to deal with market risk experiences

Banks’ risk management sustainability maintained to cope with market risk and loss restriction.

Foreign exchange net open position (NOP) of the banks formed merely 5.2% of the aggregate

capital while risk of interest rate and stock in the trading stayed at tittle amount of 1.2% and

0.7% of aggregate capital, respectively.

Performers insurers and takaful kept to vigorously deal with market risk effects as they

sustaining to be careful with risk-taking. Share holdings kept on stable at 12.9% before the

general election. For the capital allocation, stock risk declined to 8.1% comparing to the last

2017 (9.1%) of entire capital. Interest rate risk also failed to 2.5% of aggregate capital.