Corporate bond issuance healthy in August despite fragile market conditions – RAM

KUCHING: Malaysia’s corporate bond issuance remained healthy in August despite the current fragile market conditions brought on by geopolitical trade tensions and uncertainties in domestic policies, RAM Ratings observed.

In a statement, it said: “To date, overall corporate debt issuance remained higher year- on-year (yo-y) at RM69.9 billion compared to RM66.3 billion last year – despite more fragile market conditions due to persistent geopolitical and domestic policy uncertainties.”

It noted that August was a busy month of developments on both the international and domestic fronts, with a couple of trends dominating investors’ portfolio allocations.

“The global scene was still dominated by risk aversion and flight to safety to the US dollar and Treasury assets amid escalating trade war rhetoric.

“Additionally, the threatening contagion from troubled emerging markets of Turkey and Argentina along with no clear sign of any abatement in liquidity tightening by the Federal Reserve and the European Central Bank despite these downside risks, also contributed to less buying interest amongst foreign investors.

“As such, the ringgit weakened against the US dollar along with some outflow pressure on government bonds, as illustrated by the 1.1 per cent net outflow in August for long- and short-term papers. Yield movements were relatively muted in spite of this, with the 10-year MGS yields falling marginally to an average of 4.05 per cent for the month (4.08 per cent in July), underpinned by domestic support as bid-to- cover ratios mostly kept sturdy above two per cent,” it explained.