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Foreign Monies Continued to Flow into Malaysian Bonds in April, Marking Fourth Straight Month of Net Inflows — MARC
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KUALA LUMPUR (June 12): Net foreign inflows into the local bond market continued in April, marketing a fourth consecutive month of inflow, albeit at a slower pace of RM1.5 billion compared with the RM6.6 billion recorded in March, according to MARC Ratings.
"Foreign investors continued to pour into local govvies (April: RM1.4 billion; March: RM7.9 billion), while net foreign flows into local corporate bonds turned positive at RM90 million (March: -RM1.2 billion). With sustained foreign demand for local govvies, foreign holdings in this segment remained stable at 22.6% of the total outstanding for the month," MARC said in a statement.
According to MARC, gross issuance of Malaysian Government Securities/Government Investment Issues (MGS/GII) grew to RM17.5 billion in April from RM14.5 billion in March, following a jump in GII issuances to RM9.5 billion from RM5 billion.
"Five public offerings of MGS/GII raised a total of RM15 billion, namely the RM4.5 billion 10-year GII reopening, the RM0.8 billion 30-year MGS reopening, the RM2.2 billion 30-year MGS reopening, the RM5 billion new MGS issue, and RM2.5 billion 30-year GII reopening. The remaining RM2.5 billion was raised through private placements," MARC said.
Following a redemption of RM21.1 billion in March, April saw a drop in the volume of redeemed papers to RM13.8 billion, with MGS at RM11.9 billion and GII at RM1.9 billion.
"As gross issuance was higher than redemption, outstanding MGS/GII inched up to RM1,033.6 billion this month from March’s RM1,029.9 billion," MARC said.
“Local govvies rallied in April in tandem with the downward trend in UST (US Treasury) yields, which reflected the market’s expectation that the Fed’s (Federal Reserve) rate tightening cycle may end soon. The decline in yields was further supported by forward expectations relating to a moderation in growth indicators, signalled by purchasing managers’ cautionary stance, lower exports and moderating industrial production,” the group added.
Additionally, it noted that both core and headline inflation declined in recent months, and will likely moderate further this year, said the rating agency.
MARC projected that inflation would soften to 2.8% in 2023 from 2022's 3.3%, and kept its growth forecast for 2023 at 4.2%, down from the 8.7% achieved in 2022.
“In view of the progress made towards interest rate policy normalisation, we expect Bank Negara Malaysia to maintain the overnight policy rate at 3% for the remainder of the year,” MARC added.
Disclaimer
The information provided in this report is of a general nature and has been prepared for information purposes only. It is not intended to constitute research or as advice for any investor. The information in this report is not and should not be construed or considered as an offer, recommendation or solicitation for investments. Investors are advised to make their own independent evaluation of the information contained in this report, consider their own individual investment objectives, financial situation and particular needs and should seek appropriate personalised financial advice from a qualified professional to suit individual circumstances and risk profile.
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