Standard Chartered Stays Positive On MGS

KUALA LUMPUR, Oct 20 (Bernama) -- Standard Chartered Global Research said it is staying positive on Malaysian Government Securities (MGS), as local demand for long-end bonds remains healthy due to high cash on hand. In a note on Thursday, the research house said it believes the Malaysia's 2017 Budget announcement on Friday, will be neutral for the rates market in the medium term. Standard Chartered Global Research said this is despite gross supply possibly increasing modestly due to higher MGS redemptions of around US$11.25 billion (RM47 billion) in 2017, versus US$6.22 billion (RM26 billion) last year. "Based on the 2017 fiscal deficit target of 3.0 per cent of gross domestic product, we estimate gross borrowing of US$25.63 billion (RM107 billion), comprising new funding needs of US$9.58 billion (RM40 billion), and MGS and Government Investment Issues (GII) redemptions of US$16.04 billion (RM67 billion). "We also expect the government to split gross issuance of MGS bonds and GII at 55:45, versus 51:49 in 2016," it said. The company said it expects the government to maintain fiscal prudence in the 2017 Budget, but opined that, deficit reduction may be limited in a challenging revenue environment. "While we forecast higher oil prices for 2017, the government may project a conservative estimate considering the uncertain oil price outlook," it added. (US$1 = RM4.17) --BERNAMA