Published on 17 Dec 2021.
Foreign investors turned net sellers of MGS and GII in November, registering a net fund outflow of RM3.6 bil (October: net inflow of RM5.4 bil). The outflow pressure was primarily underpinned by the tapering of quantitative easing in the US and a more hawkish Federal Reserve (Fed).
Outflow pressure is likely to persist in December following the Fed’s announcement after its monetary policy meeting this month that it would accelerate the wind-down of bond purchases amid inflation fears while also bringing forward its interest rate hike cycle. The Fed projects three rate hikes for 2022.
In the primary market, MGS and GII issuance stayed robust at RM15.9 bil in November. This brings total issuance in 11M 2021 to RM155.9 bil, meeting our forecast of RM155 bil-RM165 bil for the year. We expect MGS and GII issuance to increase to RM165 bil-RM175 bil in 2022, taking into account the government’s larger deficit financing requirement as well as the refinancing of debts maturing next year.
Corporate bond issuance picked up to RM11.6 bil in November. In view of the steady and robust pace of issuance throughout this year, total corporate bond issuance reached RM104.4 bil in 11M 2021 and is likely to end the year around the upper end of our forecast range of RM100 bil-RM110 bil. RAM anticipates gross corporate issuances to amount to RM110 bil-RM120 bil in 2022. Growth will be propelled by continued economic recovery, private refinancing initiatives, sustained infrastructure financing needs and financial institutions’ capital augmentation plans.
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