BIX ARTICLE

Malaysia's Bond Market Is Highly Developed and Is the Largest In ASEAN


Featured Posts

SRI Sukuk: The Journey Towards Sustainable and Responsible Investment

Jul 23, 2020

|

5 min read

Securities Commission's Capital Market Masterplan 3 (CMP3)

Sep 21, 2021

|

2 min read

What If We Allowed Retail Investors to Directly Invest in Malaysia’s Government Bond?

Aug 24, 2021

|

8 min read

Islamic Bonds Come Under Microscope After Garuda Indonesia Default

Aug 19, 2021

|

8 min read

MARC Ratings Bhd chief economist Dr Ray Choy.
MARC Ratings Bhd chief economist Dr Ray Choy.

PETALING JAYA: Malaysia’s bond market is highly developed and is the largest in Asean, boasting a size of some US$433 billion (RM2 trillion).

The market size of US$433 billion covers corporate and government bonds. according to first-quarter 2023 (Q1’23) data from the Asian Development Bank, said MARC Ratings Bhd chief economist Dr Ray Choy.

“Indonesia and Thailand hold second and third spots with US$407 billion and US$398 billion, respectively,” he told SunBiz.

Notably, Malaysia not only takes the lead in market size but also excels in bond turnover ratio and trading volume.

“Malaysia ranks among the top three in terms of bond turnover ratio and trading volume, alongside Indonesia and Singapore,” he noted.

Choy said that while Indonesia and Singapore have a higher intensity of trading activity than Malaysia, this does not reflect a structural advantage over Malaysia.

“Firstly, Indonesia’s and Singapore’s markets are dominated by government bonds with a minor share in corporate bonds, which skews the trading turnover ratio higher, but narrows participation from the broader economy,” he said.

Choy highlighted the robustness and distinctiveness of Malaysia’s corporate bond market, attributing its resilience to the corporate sector’s preference for stability over rapid turnover.

To illustrate, in Indonesia, 44% of corporate bonds boast maturities exceeding three years, but Malaysia stands out with an impressive figure of 81%. The contrast underscores the Malaysian bond market’s aptitude for facilitating longer-term issues.

“Malaysia’s market structure has better breadth with substantial depth, since it channels funding to longer term corporate projects with greater variety in maturities and credit quality, facilitating a more effective corporate bond market than its Asean peers,” Choy said.

Emir Research head of social, law and human rights Jason Loh Seong Wei said China’s shift away from US debt should drive attention towards Malaysia’s bond market.

“With China offloading its US Treasury bond holdings – which fell to a 12-year low in 2022 below the US$1 trillion mark for the first time – we should be promoting and positioning our bond market (both public and corporate) which is the most developed in the region and highly liquid – to the country. This will bolster investment confidence and climate in Malaysia in relation to China,” Loh told SunBiz.

According to Bank Negara Malaysia, the Malaysian bond market is one of the largest and most developed in the region. “Malaysian bonds are stable, liquid and offer attractive real yields for both conventional and Islamic investors,” it stated.

The central bank acts as banker and adviser to the government and assists in planning and facilitating issuances through market infrastructure that it owns and operates.

The government relies on a range of debt instruments to manage its finances.

They include Malaysian Government Securities, which are long-term loans for development, and Malaysian Government Investment Issues, similar loans based on Islamic principles.

For short-term needs, there are Malaysian Treasury bills and Malaysian Islamic Treasury bills, which help cover immediate expenses.

Beyond government needs, local businesses also use the bond market to raise funds by issuing bonds, medium-term notes and commercial papers.

MARC Ratings Bhd chief economist Dr Ray Choy.


Source: Malaysian bond market highly developed, largest in ASEAN (2023, 14 August). The Sun Daily. Retrieved from https://www.thesundaily.my/business/malaysian-bond-market-highly-developed-largest-in-asean-CF11362617

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.
The information contained in this report is prepared from data believed to be correct and reliable at the time of issuance of this report. While every effort is made to ensure the information is up-to-date and correct, Bond and Sukuk Information Platform Sdn Bhd (“the Company”) does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information contained in this report and accordingly, neither the Company nor any of its affiliates nor its related persons shall not be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.