Foreign reserves in Malaysia, Singapore and Hong Kong fell in May as investors sold assets amid concern Europe’s debt crisis will slow the rebound in

Foreign reserves in Malaysia, Singapore and Hong Kong fell in May as investors sold assets amid concern Europe’s debt crisis will slow the rebound in the global economy.

Malaysia’s reserves fell to RM312.21 billion, equivalent to US$95.5 billion, as of May 31, from RM313.92 billion at the end of April, Bank Negara Malaysia said yesterday. Singapore’s official reserves slid 2.5 per cent to US$198.4 billion and Hong Kong’s declined 1.2 per cent to US$256.2 billion.

“Europe certainly has had an impact and there has been plenty of evidence of flows leaving Asia’s equity markets, and as risk aversion increased, outflows have accelerated,” said Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole CIB.

Asian governments said last month public debt risks and “destabilizing” capital flows are among threats to the region’s recovery. The escalation of Europe’s debt crisis forced the European Union and the International Monetary Fund to offer as much as 750 billion euros (US$898 billion) to countries in danger of financial instability and spurred a decline in global stocks last month.

“Foreign investors continued to liquidate their portfolio holdings on heightened risk aversion arising from worries that the European debt problems could halt the global recovery,” Lee Heng Guie, chief economist at CIMB Investment Bank in Kuala Lumpur, said in a note today on the Malaysian reserves.

In Malaysia, capital outflows from the equity market outpaced increased flows into the debt market in May, Lee said.

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