Exclusion from WGBI unlikely to have material impact on Malaysia


  • RHB
  • Thursday, 18 Apr 2019

KUALA LUMPUR: RHB Banking Group believes a thorough review on the Malaysian bonds will be taken before global index provider FTSE Russell makes a final decision to withdraw local government bonds from the FTSE World Government Bond Index (WGBI).

Group managing director Datuk Khairussaleh Ramli said the global index provider would not rush in dropping Malaysia from the list and the decision would only be made in September.

“It is only a speculation, but I would say that few things need to be looked at, especially Malaysia’s strong foreign exchange reserves, current account surplus, well-supported oil price, as well as a very low inflation rate, as all of these factors should also be reflecting on the bond yield as well,” he told a press conference after launching the new RHB mobile banking application here today.

He reiterated that the current bond yield does not truly reflect the fundamentals of the Malaysian market.  

“Our bond market is very deep, in fact one of the deepest in Asia and any kind of volatility can easily be absorbed by real money fund in Malaysia. So, I wouldn’t be too worried about the speculation,” he said.

The global index provider has placed Malaysian bonds on the watch list for six months due to concern about market liquidity, which simultaneously raises some concerns that an exclusion could trigger a rating downgrade.

Commenting further on the bearish index-linked counters performance which has worsen, particularly following the recent FTSE Russell’s announcement, Khairussaleh said the banking group believes that the weak performance was a temporary knee-jerk reaction due to the announcement, as well as tracking the trend in the global markets, including the emerging markets.  

“We actually have a positive outlook on the FBM KLCI Index. Of course, at the moment, the weak performance is part of market volatility and part of the effect of what is happening around the world, but we advise customers to look at particular stocks that are worth investing in,” he added.

In its first Fixed Income Country Classification Review, FTSE Russell put Malaysia and China under its full Watch List of fixed income markets that will be reviewed for potential changes to their Market Accessibility Levels.

Malaysia, currently assigned a “2” and included to the WGBI since 2004, is being considered for a potential downgrade to “1” which will render the country ineligible for inclusion in the WGBI. - Bernama
 

RHB , FTSE , bond

   

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