JAKARTA: Malaysian corporate dollar bonds are the worst performers in South-East Asia this year, but are clawing back some ground as economic growth looks set to outpace the country’s neighbours.
The securities have returned about 0.9% this month, cutting their loss for the year to 3.5%.
While that’s still worse in 2021 than Thailand, the Philippines and a broad Asian dollar debt index, there are signs that the Malaysian notes could still rebound further.
Hard-currency bond issuance from Malaysian companies is limited and yields are “attractive, ” according to Joevin Teo, head of Asian fixed income at Amundi Asset Management in Singapore.
The average yield on the securities has risen about half a percentage point this year to 2.7% amid reflationary pressures globally, a Bloomberg Barclays index shows.
Malaysia’s economy will likely expand by about 18.3% this quarter from the year-earlier-period, topping growth by other nations in the region, according to the median forecast of economists surveyed by Bloomberg.
For the full-year, economists expect growth of 5.5%, beating Indonesia and Thailand.
The relative performance of Malaysian company dollar bonds will be heavily influenced by the direction of US yields this year, given the smaller average spread cushion on the debt than some peers.
That makes returns on the notes, which are some of the highest rated in South-East Asia, more vulnerable to rising rates.
Malaysia is considering the sale of a possible dollar-denominated sustainable sukuk, which would mark the first US currency sovereign sukuk from South-East Asia this year.
Investors in Malaysia’s government dollar sukuks have lost 3.3% on average this year, the worst performance globally among such securities, partly because the country has some of the longest such securities in the world.
The ones maturing in 2045 and 2046 have gained more than two US cents (eight sen) this month as longer-dated benchmark yields have retreated. — Bloomberg