In the FTSE Fixed Income Country Classification Announcement for March 2021 released on Monday, FTSE Russell commended Bank of Negara Malaysia (BNM) on its previously implemented and ongoing initiatives to address the concerns of foreign investors when accessing the Malaysian government bond market.
It said recent market enhancements that include, but are not limited to improving secondary market bond liquidity and enhancing the foreign exchange market structure and liquidity.
The secondary market bond liquidity was improved through significantly more re-openings in 2021 of Malaysian Government Securities (MGS) issuances, a commitment to switch, as needed, illiquid bonds out and replace with more liquid bonds.
FTSE Russell said this, in turn, makes more MGS available via repo, thus facilitating a marked increase in trading volumes and introducing physical settlement (with the option of cash settlement) of MGS futures, providing an additional interest rate hedging avenue, while aiming to simultaneously boost underlying bond liquidity.
The foreign exchange market structure and liquidity was enhanced through increased price transparency after local trading hours via the now permanent Appointed Overseas Office (AOO) programme.
Hence, the move expands the dynamic hedging programme to include Japanese trust banks and global custodians and streamlining the forex (FX) documentation and due diligence process.
FTSE Russell said it is grateful for the very constructive engagement that has taken place with BNM and the number of positive initiatives that have been introduced over the last two years.
"FTSE Russell strongly encourages BNM to continue efforts to enhance the experience of international participants in the Malaysian fixed income market,” it said. - Bernama