Malaysian bonds’ foreign holdings spiked to RM8b, largest in 2 years

PETALING JAYA: Malaysia’s bond market total foreign holdings spiked to RM8 billion in November this year, after three consecutive months of muted foreign flows according to RAM Ratings.

The ratings agency noted the spike marks the largest monthly net foreign inflow since September 2017 and subsequently raised the rate of foreign participation to its highest level since November 2018, as foreign holdings constituted 13.2% of total bonds outstanding in November 2019 compared to 12.6% reported in the previous month.

“The spurt in foreign purchasing of Malaysian bonds was rather surprising given the US Federal Reserve’s less dovish stance during its monetary policy meeting on 30 October 2019, while also signalling a pause in rate movements,” said its head of research Kristina Fong in a statement.

She elaborated that the shift in interest rate expectations, which had supported a continued uptrend in US Treasury yields through November, should have dampened investor incentive to hunt for higher-yielding securities in emerging markets like Malaysia.

In November, Malaysia’s government bond issuance came up to RM10.7 billion, an uptick from an already strong MGS and GII issuance of RM9 bil in October.

This brought total issuance to RM112.7 billion in first 11-months of the year, which remains on track to meet RAM Ratings’ forecast of RM110-120 billion for 2019.

Going forward, the ratings agency expect MGS/GII issuance to expand to RM115-125 billion in 2020, taking into account the government’s deficit financing requirements pursuant to the recent tabling of Budget 2020 as well as the refinancing of maturing debts next year.

In November, it noted that corporate bond issuance was fairly robust at RM8.5 billion, up from RM5.9 billlion in the preceding month.

“In view of the healthy pace throughout this year, corporate issuance had topped our RM110-120 billion forecast for 2019,” said RAM Ratings.

It stated that year to date, total corporate issuance came in at RM120.6 billion.

“Moving ahead, we expect corporate bond issuance momentum to remain steady in 2020 on the back of a still healthy issuance pipeline, continued infrastructure financing needs next year and relatively attractive financing rates,” said the ratings agency.

For 2020, it estimated that total corporate bond to be around RM100-110 billion next year.

source https://www.thesundaily.my/business/malaysian-bonds-foreign-holdings-spiked-to-rm8b-largest-in-2-years-FH1810788