PETALING JAYA: Malaysia’s gross corporate bond issuance hit a record RM132.8 billion in 2019, outperforming the previous high of RM124.9 billion in 2017 and exceeding RAM Ratings’ projection of RM110 billion to RM120 billion.
“Looking ahead, we envisage gross corporate bond issuance to clock in at RM100 billion to RM110 billion in 2020, based on the pipeline of existing and potential funding,” said its head of research Kristina Fong (pix).
She explained that given the relatively accommodative interest rates, the momentum of corporate bond financing is anticipated to remain steady this year, anchored by the financial services sector and ongoing infrastructure financing needs.
For 2019, Fong noted that much of the increase is attributable to the robust private sector, albeit largely boosted by a one-off RM27.6 billion issuance by Urusharta Jamaah Sdn Bhd (UJSB).
“Discounting the extraordinary issue from UJSB, private sector issuance summed up to RM75.5 billion in 2019 - higher than the last five years’ average of RM64.4 billion. The robust private sector overshadowed the quieter quasi-government segment, the issuance value of which diminished to RM29.8 billion (2018: RM39.2 billion),” she explained,
As for the government segment, the ratings agency highlighted that the Malaysian Government Securities (MGS) and Government Investment Issues (GII) stood at RM115.7 billion last year, in line with its forecast of RM110 billion to RM120 billion.
It also noted that foreign participation in the Malaysian bond market heightened considerably last year, with an impressive net foreign inflow of RM19.9 billion - the largest inflow since 2012.
“The overarching theme last year was the sharp dovish turn by global central banks, especially by the US Federal Reserve, which ignited a focused hunt for yields by investors.”
While worldwide uncertainties had somewhat suppressed foreign buying activity and the threat of Malaysia’s exclusion from the FTSE-Russell global index had triggered a marked outflow last April and May, overall demand remained positive, said RAM.
This year, it projected MGS/GII issuance to amount to RM115 billion to RM125 billion after taking into account the government’s deficit financing requirements and the refinancing of debts maturing next year.
RAM also expects foreign interest to ease somewhat given the pause in the US rate-cut cycle, along with the possible potential for a 25 bps cut in the Overnight Policy Rate by end-2020.
