Foreign buying of govt securities continues for 5th month

As of year-to-date in September, total net foreign inflow into MGS/GII stood at RM4.2b


FOREIGN buying of Malaysian government securities (MGS) and government investment issue (GII) continued for the fifth consecutive month into September with over RM1.1 billion worth of net inflows.

RAM Ratings Services Bhd analyst Woon Khai Jhek said this was driven by investors’ hunt for yields and the higher weight accorded to the securities in the JPMorgan Government Bond Index Emerging Market.

“The keen foreign interest has also been robust relative to other emerging peers, such as Indonesia and Thailand.

“As of year-to-date (YTD) in September, total net foreign inflow into MGS/GII stood at US$1 billion (RM4.15 billion), outpacing Indonesia recording outflow of US$12.9 billion and Thailand also charting net outflow of US$2.2 billion,” he said in a statement yesterday.

In August, MGS recorded RM3.2 billion in net foreign inflows, while July posted RM7.1 billion net foreign inflow.

Woon added while the yield differential would continue to spur interest among investors, the steady inflow may begin to damper down in the following months.

“Key risks on the horizon include the resurgence in Covid-19 cases in Malaysia, the perceived power tussles over control of the federal government, the US presidential election in November and the uncertainties surrounding Brexit, which could diminish foreign inflows,” he said.

He further stated domestic bond yields are likely to stay suppressed amid abundant global liquidity and low-interest rates. “Another Overnight Policy Rate cut by Bank Negara Malaysia in November, the likelihood of which has been thrust back into the spotlight amid the resumption of the Conditional Movement Control Order in key urban areas, may also keep a lid on yields going forward,” Woon said.

According to the Malaysian Rating Corp Bhd (MARC), the gross issuance of the securities amounted to RM122.4 billion YTD, which is the highest amount recorded in a single year. This was 31.6% year-on-year higher than the gross issuance recorded in the previous year during the same period, at RM93 billion.

MARC noted its projection of RM155 billion to RM165 billion worth of MGS/GII issuances for 2020 was on track after Putrajaya ramped up debt issuance to fund the stimulus programmes.