BIX ARTICLE
Malaysia Bond and Sukuk: Quarterly Report 4Q2021
Mar 23, 2022
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7 min read
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4Q2021 – Negative foreign flow for Malaysian government bond in the fourth quarter
The local bond market’s foreign flow slipped into negative territory in November after three consecutive months of positive net foreign flow as investors reacted to the hawkish stance and interest rate hike by the US Federal Reserve (FED). However, bond and sukuk performance shows slight increase in December.
| GLOBAL MARKET Overview The short yield curve, 3-year US Treasuries yield increased 44 bps q-o-q whereas the yield curve of 10-year UST remained unchanged q-o-q. MY Government Bond Overview MGS and GII performance are down q-o-q with short 3-year yields increase by, 37 bps and 34 bps, respectively. The government’s fiscal consolidation is expected to face challenges next year. MY Corporate Bond & Sukuk Overview Corporate AAA performance dropped across the curve lead by the 3-year bond and Sukuk yields inching higher in anticipation of rate hikes by central bank due to inflationary concerns and economic recovery. |
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GOVERNMENT BOND AUCTION
Overview
| The government bond auction for 4Q21 garnered an average BTC of 1.9941x, a decrease from the previous quarter (3Q21: 2.289x). A reopening of 15Y MGS 05/35 received the highest BTC at 3.063x. The new/reopening issuances for MGS/GII stood at RM 40.86 billion (3Q21: RM 42.5 billion). As of December 2021, the outstanding amount for MGS/GII was at RM 903.32 billion (3Q21: RM 876.32 billion). MGS/GII tenders in 2021 were generally muted amid rising global bond yields with average BTC ratio lower at 2.07x |
4Q21 AUCTION
Source BNM, BIX Malaysia
| There will be nine reopening MGS and GII auctions in 1Q22. |
UPCOMING ISSUANCE 1Q22
Source BNM, BPAM, BIX Malaysia
FOREIGN HOLDINGS OF MGS AND GII
Overview
| The foreign inflow to MGS and GII tapered off in 4Q21 with net inflow amounted RM 5.46 billion, - RM 3.67 billion and RM 6.29 billion respectively in October, November, and December. As of December 2021, the total foreign holdings of MGS and GII stood at RM 233.96 billion (June 2021: RM 225.87 billion), a 4% increase from the previous quarter. As progressing to 2022, it is expected the Federal Government’s fiscal consolidation to continue facing challenges in meeting the reduced targeted fiscal deficit target of 6.0% of GDP; given the realistic growth target and revenue projection which may have some upside. |
CORPORATE BOND & SUKUK
Overview
| RM 49.13 billion corporate bonds and sukuk were issued in 4Q21 (3Q21: RM 49.25 billion), -0.24% decrease from the previous quarter. The government-guaranteed rated bonds and sukuk were the most issued with RM 9.76 billion issuances. AAA rated is the second most issued with RM 9.13 billion issuances. Corporate credit space in Malaysia is dominated with AAA rated issuances with year-to-date issuance amounted to RM 36.83 billion. In 4Q21, Tenaga Nasional Berhad issued the largest amount of RM 1.2 billion. |
ISSUANCE 4Q2021
Source BNM, BIX Malaysia
RATING OUTLOOK
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Two downgraded bonds/sukuk in 4Q21.
Downgrade
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Source: MARC, RAM and BIX Malaysia
BOND STATISTICS
Overview
Outstanding Amount by Bond Classes
| As of December 2021, the outstanding amount of Malaysian bond market was at RM 1.74 trillion. (September 2021: RM 1.72 trillion). Breakdown by bond classes, the outstanding amount for government issuances stood at RM 903.32 billion. The corporates and quasi-government outstanding amounts were at RM 519.72 billion and RM 773.24 billion, respectively. |
Overview
Outstanding Amount by Principal and Bond Classes
| As of December 2021, the outstanding amount of the Government conventional bond was at RM 480.72 billion and the Government Islamic bond (Sukuk) at RM 422.60 billion. The conventional Quasi-Govt outstanding amount stood at RM 21.49 billion whereas its Islamic counterpart stood at RM 304.81 billion. For corporates issuance, the conventional bond outstanding amount was at RM 143.57 billion and its Islamic sukuk was at RM 629.27 billion. |
Disclaimer
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, 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.
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