KUALA LUMPUR, Dec 20 — The Malaysian bond market recorded an unexpected surge in foreign interest, with holdings soaring to RM8 billion, in November after three consecutive months of muted foreign flows.
This marked the biggest monthly net foreign inflow since September 2017, RAM Ratings Services Bhd said in a statement.
In addition, the rate of foreign participation rose to its highest level since November 2018, with foreign holdings constituting 13.2 per cent of total bonds outstanding in November 2019 (October: 12.6 per cent).
The spurt in foreign purchasing of Malaysian bonds was rather surprising, given the US Federal Reserve’s less dovish stance during its monetary policy meeting on Oct 30, while signalling a pause in rate movements.
“This shift in interest rate expectation, which had supported a continued uptrend in US Treasury yields through November (2019), should have dampened investor incentive to hunt for higher-yielding securities in emerging markets like Malaysia,” RAM Ratings’s head of research Kristina Fong noted.
In November, government bond issuance stood at RM10.7 billion, an uptick from an already strong Malaysian Government Securities (MGS) and Government Investment Issues (GII) issuance of RM9.0 billion in October.
“This brought total issuance to RM112.7 billion in 11 month of 2019, still on track towards meeting our forecast of RM110 billion-RM120 billion for the year.
“Going forward, we expect MGS/GII issuance to expand to RM115 billion-RM125 billion in 2020, taking into account the government’s deficit financing requirements pursuant to the recent tabling of Budget 2020, as well as the refinancing of maturing debts next year,” she said.
Meanwhile, corporate bond issuance was fairly robust at RM8.5 billion in November, up from RM5.9 billion in the preceding month.
“In view of the healthy pace throughout this year, corporate issuance had topped our RM110 billion-RM120 billion forecast for 2019.
“Total corporate issuance in 11 month of 2019 came in at RM120.6 billion. Moving ahead, we expect corporate bond issuance momentum to remain steady in 2020 on the back of a still healthy issuance pipeline, continued infrastructure financing needs next year, and relatively attractive financing rates,” Fong said.
As such, total corporate bond issuance is estimated to amount to RM100 billion-RM110 billion next year.