Foreign holdings of Malaysian bonds at 7-month high

PETALING JAYA: Foreigners turned net buyers of Malaysian bonds in September, rising 4.9% month-on-month to hit RM200.1 billion, the highest level in seven months, according to RAM Ratings’s Bond Market Monthly Report.

The rating agency said this indicates that foreign investors’ confidence seemed to have returned in September, amid the current landscape of modest volatility and low yields.

Net foreign inflows amounted to RM9.3 billion in September, supported by the strengthening of the ringgit against the US dollar and robust economic fundamentals.

Of the RM9.3 billion inflows, Malaysian Government Securities (MGS) and Government Investment Issues (GII) accounted for the lion’s share of RM7.9 billion.

Amid renewed expectations of another Fed rate hike, RAM Ratings said corporate bond issuance climbed up to RM18.1 billion in September as issuers took the opportunity to lock in better rates ahead of the rate tightening.

For the first nine months of the year, the bonds issuance stood at RM84.4 billion, which already reached almost 90% of the lower end of the projected RM95 billion to RM105 billion by RAM Ratings for 2017.

Following the US Fed’s commencement of its balancesheet trimming in October by gradually reducing the reinvestment of principal payments from matured securities, RAM Ratings foresees some strengthening of the US dollar, although this may be moderated by uncertainties over the continuity of the North American Free Trade Agreement and the passing of US President Donald Trump’s business-friendly tax reform bill.

Meanwhile, RAM Ratings said it will closely monitor the European Central Bank’s QE tapering after years of low interest rates and massive bond purchases.