LOCAL BACKING FOR GOVT SECURITIES
Outflow mostly by foreign ‘non-sticky’ investors, says RAM Rating
THE demand for government securities is still generally supported by local institutional investors, as evidenced by the trend last month, said RAM Rating Services Bhd.
“As such, we may experience a rebalancing from foreign to domestic ownership this year,” said RAM in a statement yesterday.
The rating agency said foreign investor outflow from the Malaysian bond market was particularly more pronounced last month, representing a monthon-month increase of 3.4 per cent compared with the start of the year when net foreign outflow momentum seemed to dissipate.
“A closer look at the composition of investors reveals that most of the outflow from November onwards was contributed by short-term ‘non-sticky’ investors, such as banks and asset management companies,” it said.
Tallying with the observation, yields of shorter-tenured government bonds (three-month to five-year papers) experienced an upward movement last month, signalling some selling pressure among short-term “non-sticky” investors prior to United States Federal Reserve’s first policy rate rise for the year on March 15, it said.
It expects two more increases for this year.