Friday 29 Mar 2024
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KUALA LUMPUR (Sept 20): Malaysia’s bond market experienced some pressure from the outflow of foreign investors in August, amid escalating geopolitical risks, combined with uncertainty over global liquidity, according to RAM Rating Services Bhd.

As highlighted in the latest edition of its Bond Market Review, the rating agency said the global scene in August was dominated by risk aversion and shift in fund flows to safer-haven assets — US dollar and Treasury assets — amid escalating trade war rhetoric, along with threatening contagion from troubled emerging markets from Turkey and Argentina and no clear sign of any abatement in liquidity-tightening by theUS Federal Reserve and European Central Bank.

RAM noted these downside risks resulted in less buying interest among foreign investors.

“As such, the ringgit weakened against the USD, along with some outflow pressure on government bonds, as illustrated by the 1.1% net outflow in August for long- and short-term papers,” it said. 

Despite more fragile market conditions, yield movements were relatively muted, with 10 years Malaysian Government Securities yields falling marginally to an average of 4.05% for the month, compared to 4.08% in July, mainly underpinned by domestic support as bid-to-cover ratios were mostly kept sturdy above 2.00%, the ratings agency said.

Corporate bond issuance remained higher year-on-year at RM 69.9 billion, compared to RM66.3 billion, in spite of persistent geopolitical risk and domestic policy uncertainties, RAM noted.

“..corporate bond issuance continued to be healthy, with RM6.1 billion of private sector debt issues in August,” the rating agency added. 

The quasi-government sector saw more muted issuance activity of RM2.2 billion, compared with corporate issuance of RM6.1 billion, mainly attributed to Danainfra Nasional Berhad, the funding vehicle for the ongoing MRT project.

RAM expects benign issuance from quasi-government sector to continue, going forward, as a result of continued cost rationalisation initiative taken by the government. 

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