Malaysia remains on the watchlist for a potential downgrade although the risk is lower now given Bank Negara Malaysia’s initiatives and various engagements to address investors’ concerns. — Bernama photo
KUALA LUMPUR: Although the risk is low, the Malaysian bond market cannot discount the possibility of being excluded from the World Government Bond Index (WGBI), said RAM Ratings’ head of research Kristina Fong.
She said Malaysia remained on the watchlist for a potential downgrade although the risk is lower now given Bank Negara Malaysia’s initiatives and various engagements to address investors’ concerns.
“While the results of FTSE Russell’s most recent review on Sept 26 were ultimately favourable to Malaysia, the related uncertainties in the lead up to it and the potential inclusion of Chinese bonds in the WGBI have kept foreign investors on the sidelines for the month,” she said in a statement yesterday.
In September, Malaysian corporate bond issuance accelerated to RM14.9 billion (August: RM4.6 billion), driven by the robust issuance from the quasi-government and private sectors.
This had brought overall corporate issuance to RM27.7 billion in third quarter of 2019.
The strong pace of corporate issuance has been a mainstay through most of 2019, likely due to attractive funding costs as yield-to-maturities have been trending downwards since the beginning of the year.
“Despite the relatively muted government bond issuance in September (RM5.5 billion), the full-year Malaysia Government Securities (MGS) and Government Investment Issue (GII) issuance remains on track towards meeting our projection of RM110 billion-RM120 billion for 2019.
“Going forward, we expect MGS/GII issuance to come up to RM115 billion-RM125 billion in 2020, taking into account the government’s deficit financing requirements pursuant to the recently tabled 2020 Budget and the refinancing of maturing debts next year,” she added. — Bernama