Investors will be watching
KUALA LUMPUR: Foreign holdings of Malaysian bonds recorded a net inflow of RM2.9bil in March, of which around 72.2% of total inflows were shorter-term papers.
RAM Ratings said on Wednesday that since a large share of foreign bond flows so far this year was holdings in short-term papers, global uncertainties and developments may lead to continued fluctuations in foreign bond holdings down the line.
The latest edition of RAM Ratings’ Bond Market Monthly showed the net inflow of foreign bond holdings followed a very good month for Malaysia.
This was despite increased global market volatility amidst escalating trade tensions between the US and China.
It also pointed out Bank Negara Malaysia’s GDP growth projection of 5.5% to 6% – higher than the consensus forecast and slightly above RAM’s expectation of 5.2% – pointed towards continued domestic strength, coupled with moderating headline inflation numbers.
Its March edition showed corporate bond issuance almost doubling in March from the preceding month, rising to RM13.1bil (February: RM6.9bil).
Much of the upturn was due to the private sector (particularly banking entities), which added RM7.9bil to gross issuance.
This lifted the on-year issuance in Q1, 2018 by 7.3% to RM29.6bil (Q1, 2017: RM27.6bil).
RAM Ratings said nonetheless, future issuance amounts could moderate as local bond yields are likely to face upward pressure in tandem with higher global yields.
The resilience of the ringgit in March (monthly average of US$/RM3.90 compared to February’s US$/RM3.91) also helped to attract investors.
The ringgit continued to appreciate in April, strengthening to below RM3.88 against the US$ in the first two weeks, as the dip in tech stocks and concerns over an increased likelihood of a US-China trade war grew, putting downward pressure on the US$.
“As the situation is still developing, capital markets and the USD in particular are expected to remain volatile as new information comes to the fore.
“On the local front, the 14th Malaysian general election, which will take place on May 9, and the run-up to the polls are not expected to disrupt the bond market to a great extent, as demonstrated in the past,” said RAM Ratings.
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