By NUR HAZIQAH A MALEK
The Malaysian Government Securities/Government Investment Issues (MGS/GII) gross issuance could reach RM100 billion to RM105 billion this year, according to Malaysian Rating Corp Bhd (MARC).
The rating house said the projection is based on the government’s budget deficit estimated at RM39.8 billion, along with RM62.8 billion in MGS and GII papers which will mature this year. MARC has projected the GII-to-MGS ratio at 44:56.
Total gross corporate bond issuance this year is also expected to reach RM100 billion especially from government-guaranteed segment and large-scale infrastructure projects like the Light Rail Transit Line 3 and Mass Rapid Transit Line 2 extensions.
MARC also expects continuous net inflow from foreign holdings due to the expected rate hike early this year.
The strong ringgit outlook is supported by improvement in crude oil prices and the faster interest rate normalisation pace.
The central bank is expected to raise the benchmark rate between 25 basis point (bps) and 50bps this year as the economy is projected to rise above 5% on continuous export demand and higher consumer spending.
MARC, in its report yesterday, expects inflation to linger around 3% this year, driven by cost-push and demand-pull factors.
Meanwhile, the secondary market for MGS and corporate bonds are anticipated to rise progressively this year, cushioned by the fractional flow reserve and Overnight Policy Rate hikes, economic prospects and the ringgit’s trend against the US dollar.
Banks’ financial performance and capitalisation are expected to remain stable despite the impaired loan volumes and higher credit costs arising from the Malaysian Financial Reporting Standards 9 implementation.
MARC expects financial institutions will continue to hover on secure rating trajectories, along with a stable outlook for most non-financial sector issuers.
Last year, Alam Maritim Resources Bhd was the only issuer that experienced downgrading and eventually defaulted.