Malaysian Financial Market Remains Resilient Despite COVID-19, Says Association

KUALA LUMPUR, Sept 1 (Bernama) -- The Malaysian financial market remains resilient and continues to function efficiently despite a challenging global economic environment from the COVID-19 pandemic, said the Financial Markets Association Malaysia. The association said in the second quarter, Malaysia’s growth slowed to a pace of -17.1 per cent year-on-year (y-o-y), in line with other regional peers following measures introduced to contain the spread of the pandemic. Similar growth contractions were seen across Asian economies including Singapore, the Philippines and Indonesia, which recorded negative growth prints in the second quarter of -13.2 per cent, -16.5 per cent and -5.3 per cent y-o-y respectively, it added. The association said despite the negative growth print registered in the second quarter this year, domestic growth is expected to improve in the second half of 2020 with the gradual reopening of economic activities. The recent rebound in exports seen in June at 8.8 per cent y-o-y versus a contraction of -25.5 per cent in May can be attributed to further easing in movement controls, which are expected to provide renewed positive catalysts to support growth recovery in the last six months of 2020. “We have observed limited economic activity for the period between April and June due to strict enforcement. “However, by late June we have witnessed a pick up in major economic activities, primarily in the manufacturing, agriculture and construction sectors given that most sectors were reopened and movement control orders were relaxed. “It is likely that going forward there is a very strong possibility of a sharp recovery taking hold of the economy,” said the association in a statement today. It noted that Malaysia has injected almost RM45 billion in fiscal support directly, which amounts to about 3.0 per cent of its gross domestic product and this is part of a planned RM295 billion total injection into the economy. In the ringgit bond market space, trading activities were healthy, recording a robust daily transacted volume of RM5 billion for ringgit government bonds and sukuk year-to-date, higher than the daily average traded volume of RM4.2 billion observed during the same period in 2019. Meanwhile, the monthly average traded government bond and sukuk volume in 2020 remained robust with RM102 billion transacted, higher than the monthly average of RM85 billion recorded in 2019. The association said the robust trading volumes are reflective of efforts by Bank Negara Malaysia (BNM) to enhance liquidity, which include amongst others, increasing the availability of off-the-run bonds to be borrowed via repo for market-making activities. The 2020 auction calendar continues to feature more reopening tenders to increase the depth and liquidity of existing benchmarks, with the size of the outstanding 10-year benchmark currently reaching above RM20 billion. “Although combined issuances of new primary corporate bonds in the first half of 2020 were lower at RM38.8 billion versus RM74.9 billion raised in first half of 2019, we expect the momentum to pick up in the second half of 2020. “This is because corporates are compelled to lock in on lower borrowing cost with issuances skewed towards the longer-dated spaces,” it said. It noted that issuance momentum has grown considerably in recent weeks following the pre-emptive overnight policy rate (OPR) cut of 25 basis points by BNM in July, which brings the current OPR level to a record low of 1.75 per cent,” said the association. On another note, foreign ownership of the ringgit denominated bonds gained positive traction in recent months, with positive bond inflows for the months of May, June and July of RM1.5 billion, RM11.6 billion and RM7.1 billion respectively. Total foreign ownership of ringgit government bonds currently stands at 22.7 per cent in July, an increase from 22.2 per cent recorded in June. -- BERNAMA