Corporate bonds issuance rebounds in August

KUALA LUMPUR: A total of RM8.7bil of corporate bonds was issued in August, following the low of RM2.8bil in the preceding month.

This bring the year-to-date issuance value to RM66.3bil, a 10.3% increase from the year-ago period.

"There was a good mix of bonds from various sectors, with the largest issues from
financial services and infrastructure and utilities – the two primary drivers of the Malaysian bond market," according to RAM Ratings.

The largest issuer of the month was Tenaga Nasional Bhd, which issued RM2bil under its RM5bil IMTN Sukuk Wakalah Programme. The issuance is rated AAA/Stable by RAM.

Perbadanan Tabung Pendidikan Tinggi Nasional attributed for more than half of the issuance value by the financial services sector in August, with RM1.8bil issued under its RM8bil government-guaranteed IMTN Sukuk Murabahah Programme.

RAM noted declining MGS and corporate yields across almost the entire maturity spectrum and bond classes, owing to foreign interest in higher-yielding assets in emerging markets. 

"For the month, MGS and corporate bonds posted respective foreign inflows of RM2.1bil and RM563mil. That said, overall foreign holdings ebbed 0.4% m-o-m (or RM745mil), due to a sizeable quantum of maturing Government Investment Issues
(GII).

"Moving forward, the risk of further outflow of foreign holdings may heighten amid rather lumpy maturities of government bonds over the next three months, with a cumulative value of RM33.8bil."

The US Federal Reserve move towards balance-sheet normalisation in october and commitment to maintaining the rising cycle for the federal funds rate are expected to dampen the pace of incoming foreign investment funds. 

However, market volatility will curtail the current profile of foreign investors  

"About 55% of the foreign investors of Malaysian government bonds are of the 'sticky' type, comprising central banks, governments, pension funds and insurance companies, which are less reactive to sentiment changes than portfolio investors and more responsive to longer-term fundamentals," RAM said.