Malaysia Retains Rank As One Of Region's Largest Bond Markets

KUALA LUMPUR, March 27 (Bernama) -- The Malaysian bond market continued to retain its position as one of the largest markets in the Southeast Asian region in 2018, said Bank Negara Malaysia (BNM). It said the outstanding government and corporate bonds grew by 8.8 per cent to RM1.4 trillion in 2018, representing 51.7 per cent and 46.7 per cent of gross domestic product (GDP), respectively (2017: RM1.3 trillion, government: 49.7 per cent of GDP; corporate: 45.7 per cent of GDP). Sukuk, which accounted for 60.1 per cent of total outstanding debt securities from 58.8 per cent in 2017, continued to dominate issuances, the central bank said in its Financial Stability and Payment Systems Report 2018 released Wednesday. “Various external developments during the year, including the normalisation of monetary policy by the Federal Reserve and global volatility triggered by the US-China trade tensions contributed to a global risk-off sentiment, which saw portfolio outflows from emerging markets, including Malaysia. “Nevertheless, the depth of the debt securities market continued to support orderly market conditions, underpinned by strong financial institutions and domestic institutional investors, as reflected in continued active secondary trading in the government securities market which recorded a turnover of RM1.2 trillion in 2018,” it said. The report said bond yields remained stable, while demand for Malaysian Government Securities (MGS) and Malaysian Government Investment Issues (MGII) remained strong, reflecting active participation from mainly banking institutions, insurance companies and institutional investors. It said the average bid-to-cover ratio recorded in 2018 was 2.293 times compared with 2.198 times in 2017. “In contrast with the more bullish performance in 2017, the ringgit depreciated by 1.8 per cent against the dollar to close at RM4.1385 in 2018 on the broad US dollar strength. “Downside risks for the ringgit were mitigated by Malaysia’s continued current account surplus of the balance of payments and sound economic fundamentals,” BNM said. In the foreign exchange (FX) market, bid-ask spreads for US$/RM remained stable at 24 pips on average for 2018 (2016 and 2017 average: 35 pips), supported by sufficient domestic market liquidity. It said greater flexibility accorded to fund managers to dynamically manage their FX risk and hedge their positions further supported the development of the onshore FX market. “As at end-2018, more than 80 fund managers had registered with the bank for dynamic hedging flexibilities, with total eligible assets exceeding RM120 billion. “The progressive liberalisation of Foreign Exchange Administration (FEA) policies over the years has contributed to the greater decentralisation of reserves which are held by corporates and financial institutions, thus enabling external obligations to be met without creating claims on the bank’s international reserves,” it said. As at end-2018, the international reserves stood at US$101.4 billion, which is sufficient to finance up to 7.4 months of retained imports and is 1.0 time the short-term external debt. “In line with greater digitalisation in the financial sector, the bank is working towards the creation of a framework for electronic trading platforms, which will detail the form of establishment and other requirements to be complied with by platform providers. “An Exposure Draft is expected to be published in the first half of 2019,” it said. -- BERNAMA