Malaysian bonds tanked in November, sending yields significantly higher compared to October on return of risk sentiment. Domestic investors cut down on their Malaysian Government Securities (MGS) holdings as the prospect of a quicker economic recovery had heightened, diminishing expectations of future rate cuts.
Risk-on sentiment was mainly spurred by positive news of COVID-19 vaccine breakthroughs; several vaccines have been proven effective. The improved risk appetite saw investors flocking towards riskier assets like equities. Sentiment was also lifted by the signing of the Regional Comprehensive Economic Partnership (RCEP) pact and better-than-expected 3Q2020 GDP data. Malaysia’s gross domestic product (GDP) contracted by 2.7% y-o-y in 3Q2020 (2Q2020: -17.1%).
Losses in MGS were also spurred by the passing of Budget 2021 at the policy stage and the EPF’s statement that it may need to liquidate assets to fund i-Sinar withdrawals. These factors have cemented expectations of higher MGS supply for 2021.
At end-November, MGS yields along the 3y15y curve were higher by 15bps to 24bps while yields at the longer end were higher by 26bps to 37bps, thus steepening the curve. Both the 3y MGS and 10y MGS were last quoted at 1.91% (Oct: 1.76%) and 2.74% (Oct: 2.62%).
Foreign investors continued to be net buyers of local bonds for the seventh consecutive month, albeit at a slower pace. Foreign buying interest was supported by COVID-19 optimism, firmer crude oil prices and Malaysia’s ongoing deflationary environment. In October, Malaysia’s CPI inflation had come in at -1.7% y-o-y (Sep: -1.4%).
Total foreign holdings in November rose by RM1.9 billion (Oct: 8.0 billion) to RM219.4 billion, equivalent to 13.6% of total outstanding. MGS continued to be the major beneficiary of foreign flows, followed by Government Investment Issues (GII). Foreign holdings in MGS rose by RM1.8 billion (Oct: RM3.9 billion) to RM175.0 billion, equivalent to 40.1% of total outstanding MGS.
-Ends-
Contacts:
Tan Jack Fong, +603-2717 2958/ jackfong@marc.com.my
Firdaos Rosli, +603-2717 2936/ firdaos@marc.com.my
[This announcement is available on MARC’s corporate website at www.marc.com.my]
---- DISCLAIMER ----
This communication is provided by Malaysian Rating Corporation Berhad (MARC) based on information believed by MARC to be accurate and reliable as derived from publicly available sources or provided by the rated entity or its agents. MARC, however, has not independently verified such information and makes no representation as to the accuracy or completeness of such information. Any assignment of a credit rating by MARC is solely to be construed as a statement of its opinion and not a statement of fact. A credit rating is not a recommendation to buy, sell, or hold any security.
© Press Release 2020
Disclaimer: The contents of this press release was provided from an external third party provider. This website is not responsible for, and does not control, such external content. This content is provided on an “as is” and “as available” basis and has not been edited in any way. Neither this website nor our affiliates guarantee the accuracy of or endorse the views or opinions expressed in this press release.
The press release is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Neither this website nor our affiliates shall be liable for any errors or inaccuracies in the content, or for any actions taken by you in reliance thereon. You expressly agree that your use of the information within this article is at your sole risk.
To the fullest extent permitted by applicable law, this website, its parent company, its subsidiaries, its affiliates and the respective shareholders, directors, officers, employees, agents, advertisers, content providers and licensors will not be liable (jointly or severally) to you for any direct, indirect, consequential, special, incidental, punitive or exemplary damages, including without limitation, lost profits, lost savings and lost revenues, whether in negligence, tort, contract or any other theory of liability, even if the parties have been advised of the possibility or could have foreseen any such damages.
