Published on 15 Sep 2021.
Foreign investors charted a surprise return in August despite heightened political uncertainties in Malaysia. The bond market registered a robust net foreign inflow of RM6.6 bil (July: outflow of RM3.6 bil), mainly driven by MGS and GII (RM6.2 bil). August’s foreign inflow was largely concentrated in the second half of the month, coinciding with the appointment of the ninth prime minister on 22 August. The market may have taken comfort in the swift resolution of the political quagmire, as the 10-year MGS yield fell 4 bps while the ringgit appreciated sharply against the USD from 4.24 to 4.17 towards the end of August.
The present favourable yield spread of MGS over UST (around 190-200 bps) should continue to drive foreign interest in the near term. Over the longer horizon however, the monetary policy stance by central banks of developed markets remains a key driver of fund flows. At the Jackson Hole Economic Symposium on 27 August, the US Fed chair reiterated that the central bank is in no hurry to raise rates. The upcoming Federal Open Market Committee meeting from 21-22 September where the Fed will release its latest “dot-plot” projections, is a crucial market watch on future rate direction. Meanwhile, the European Central Bank on 9 September decided to moderately reduce the pace of its asset purchase programme in 4Q 2021, insisting however that its action did not amount to tapering. All said, rate hikes may likely still be some way off, although markets may price in these expectations sooner.
About RAM Rating Services Berhad (RAM Ratings)
Established in 1990, RAM Ratings is a leading credit rating agency registered under the Securities Commission’s Guidelines on Registration of Credit Rating Agencies, 2011. In addition to the provision of credit ratings for corporate bonds and sukuk and their issuers, RAM Ratings also provides research and publications on Islamic finance, fixed income and macro-economic and industry analysis as well as data analytics relating to credit risk, counterparty assessments and other related domains.
ALL INFORMATION IS PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND. Although every reasonable care has been taken to ensure the accuracy, completeness and objectivity of the information contained in this Media Release, RAM Ratings makes no representation or warranty, whether express or implied, as to its accuracy, completeness and objectivity and accept no responsibility or liability relating to any losses or damages howsoever suffered by any person arising from any reliance on the views expressed or information in this Media Release. RAM Ratings assumes no obligation to update any information or statement contained herein, save for any information required to be disclosed by law.
Published by RAM Rating Services Berhad
© Copyright 2021 by RAM Rating Services Berhad
All rights reserved. This material may not be published, reproduced, broadcast, rewritten or redistributed without prior permission.