Malaysia's bond market among most attractive in emerging economies

The amount of negative-yielding bonds globally have jumped 47% to more than $12 trillion this year as signs that the Federal Reserve and the European Central Bank will ease spurred a bond rally.

KUALA LUMPUR: The Malaysian bond market is one of the most attractive among the emerging economies, driven by robust fundamentals, current account surplus and rising commodity prices, a global investment management group said.

Aberdeen Asset Management Asia Ltd Head of Asian Sovereign Debt, Kenneth Akintewe, said unlike the majority of emerging markets which are negatively impacted by the increase in commodity prices, Malaysia had benefited from the situation due the country's positive commodity exports.

"It is actually providing some degree of positive stimulus and support to the underlying market valuations," he told reporters on the sidelines of the Investment Conference 2018 here today.

He said the Malaysian bond market had also become very cheap due to corrections to previous events such as such as restriction non-deliverable forwards and the surprise recent election result.

"But when you compared the valuation with some of the valuations you see in the past few years, it looks very, very cheap.

"Because of that, you are also able to take position in anything from 10 to 20-year bond," he said.

He said the country's bond market was also very stable as compared to other emerging markets and had a low exposure to US treasury yields.

"This provides quite a bit of diversification away from US treasury-like rise, away from other big broader emerging markets-type risk and some degree of stability in their (investors) portfolio," he said.

On Malaysia's debt, he said the government's effort on fiscal consolidation and managing the debt should not just focus on absolute debt level but also composition of debt such as short-term and external debts.

"Malaysia, as well as many Asian economies, has a very good debt maturity profile, relatively low external debt, good coverage of short-term debt and a very high level of foreign exchange reserves," he said.

He said over the long term, the robust economic growth environment in the region was expected to increase the ability of government and policymakers to bring down the debt level.

Themed "Diversification: Redefining Perspectives", the half-day conference discusses opportunities in the current climate across a suite of asset classes. - Bernama