Bond issuance rises to RM13.1b in March


Corporate bond issuance almost doubled to RM13.1 billion in March from RM6.9 billion in the previous month, but higher global yields would taper the rise in the months to come for debt papers.

RAM Rating Services Bhd (RAM Ratings) said the rise in issuance in the third month was largely driven by the private sector with banking entities adding RM7.9 billion to the gross issuance.

RAM Ratings said the bond issuance in March boosted the year-on-year issuance in the first quarter of 2018 by 7.3% to RM29.6 billion, compared to RM27.6 billion in the corresponding period a year ago.

“Nonetheless, future issuance amounts could moderate as local bond yields are likely to face upward pressure in tandem with higher global yields,” it said in a statement yesterday.

Foreign holdings of Malaysian bonds recorded a net inflow of RM2.9 billion with about 72.2% of the total inflows constituting shorter term papers.

“With a large share of foreign bond flows so far this year attributed to holdings in short-term papers, global uncertainties and developments may lead to continued fluctuations in foreign bond holdings down the line,” RAM Ratings said.

The net inflow of foreign bond holdings followed a very good month for Malaysia, despite increased global market volatility amid escalating trade tensions between the US and China.

RAM Ratings said Bank Negara Malaysia’s economic growth projection of between 5.5% and 6% — higher than the consensus forecast and slightly above RAM Ratings’ expectation of 5.2% — pointed towards continued domestic strength, coupled with moderating headline inflation numbers.

The ringgit’s resilience in March, a monthly average of RM3.90 compared to February’s RM3.91 against the greenback, also helped attract investors.

“The ringgit continues to appreciate in April, strengthening to below RM3.88 against the US dollar in the first two weeks, as the dip in tech stocks and concerns over an increased likelihood of a US-China trade war grew, putting downward pressure on the US dollar,” said the rating agency.

“As the situation is still developing, capital markets and the US dollar in particular are expected to remain volatile as new information comes to the fore,” RAM Ratings warned.

On the local front, the 14th General Election — which will take place on May 9 — and the run-up to the polls are not expected to disrupt the bond market to a great extent, as demonstrated in the past.