BPA Malaysia Weekly Bond Market Report November 18 2012

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Over the week, the Thomson Reuters BPAM All Bond Index posted a marginal gain of 0.1 per cent from last week’s reading of 129.51 to end the holiday-shortened week at 129.64 as most market players awaited the announcement of Malaysia’s gross domestic product (GDP) for the third quarter of 2012 (3Q2012).

As it turns out, the 3Q2012 GDP expanded by 5.2 per cent yearon- year.

Meanwhile, the 2Q2012 GDP was revised upwards to 5.6 per cent from 5.4 per cent previously.

Market players were also digesting the news that the Euro Area economy has once again fallen into recessionary territory, the second occurrence in four years, in which the 3Q2012 GDP contracted 0.1 per cent as compared to the previous quarter.

The top 10 most actively traded bonds this week was still dominated by sovereign papers with trading volume totaling just slightly above RM5 billion.

The most liquid bond is the newly issued 7.5-year GII benchmark bond maturing on May 15, 2020 which accounted for over 22 per cent of total trading volume in the top 10 spot.

Looking at the new issuance of 7.5-year GII benchmark bond, on November 12, 2012, the government of Malaysia issued a new 7.5-year GII benchmark bond maturing on 15 May 2020.

The issuance size was RM3.5 billion with a profi t rate of 3.576 per cent.

Meanwhile, on the summary of new private debt securities (PDS) issuance during the week, on November 14, 2012, Segi Astana Sdn Bhd issued two tranches of Danajamin guaranteed bond worth RM10 million each with coupon rates of 4.45 per cent and 4.53 per cent respectively.

On rating actions during the week, on November 12, 2012, RAM Ratings had placed the A2 rating of OSK Investment Bank’s subordinated medium-term notes on Rating Watch with a positive outlook.

The Rating Watch was premised on the acquisition of OSK Investment Bank by RHB Capital Bhd from OSK Holdings Bhd and the subsequent proposed merger with RHB Investment Bank Bhd, which was announced to Bursa Malaysia on November 9, 2012.

On November 14, 2012, MARC had downgraded its ratings on Tanjung Langsat Port Sdn Bhd’s (TLP) RM250.0 million Sukuk Musyarakah Bonds and RM135.0 million Musyarakah Commercial Papers/Musyarakah Medium Term Notes Programme to BBB+IS and MARC-3ID/BBB+ID from A-IS and MARC-2ID/A-ID respectively.

The outlook on the ratings remains negative.

The rating action reflects TLP’s continued losses and weak cash fl ow arising from a delay in the commencement of TLP’s port operations which has resulted in erosion of its shareholders’ funds and heavy reliance on sale of land to meet its principal repayments which commenced in July 2012.

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