CREDIT ANALYSIS REPORT

MONTHLY BOND MARKET & RATING SNAPSHOT - DECEMBER 2021 - FULL REPORT

Report ID 605389003771 Popularity 1164 views 42 downloads 
Report Date Jan 2022 Product  
Company / Issuer Fixed Income Bond Market Update Sector Bond Market Update - Bond Market Update
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Rationale
Global Markets     
 
   
The Fed accelerated its asset tapering activity in December 2021 amid rising inflation, leading up to the end of the bond-buying programme by March 2022. Consequently, the UST yields rose between 8bps and 21bps across all maturities. ECB retained its dovish tilts as the central bank maintained its view that the current heated inflation is a pandemic-induced cycle of inflation. BoE embarked on a hawkish move by increasing interest rates by 15bps to 0.25% in December to tame inflation. PBOC cut one-year loan prime rate by 5bps to 3.8% amid China's slow economic outlook due to its zero-covid policy, slumps in the property sector and supply chain bottlenecks.

Malaysian Government Bond Market     
     
In December, the total outstanding MGS/GII papers rose to RM903.3 billion amid no redemption being recorded. This is notwithstanding the lower issuances in both MGS (December: RM4.5 billion; November: RM11.4 billion) and GII segments (December: RM3.5 billion; November: RM4.5 billion). Total gross issuance of MGS/GII came in at RM163.9 billion (MGS: RM86.9 billion; GII: RM77.0 billion) for the whole year, up 7.9% from RM151.9 billion in the previous year, which was lower than our forecast (RM170.0 billion to 180.0 billion). Following the Fed's hawkish tilt, the last leg of the month's auction of the RM4.5 billion 3-year MGS papers ended with the lowest BTC ratio since October 2019 at only 1.2x.

Malaysian Corporate Bond Market     
    

Gross issuance of long-term corporate bonds decreased in December to RM9.8 billion (Nov: RM11.6 billion).  Unrated corporate bonds issuances rose to RM4.4 billion from RM0.6 billion in November 2021. On the other hand, the other segments' issuances plummeted in December where quasi-government issuances decreased to RM0.6 billion (November: RM3.4 billion), whereas the rated corporate bond segment – Cagamas included – raised RM4.9 billion (November: RM7.7 billion). Overall, local corporate bond issuances throughout 2021 came in at RM114.2 billion (2020: RM104.6 billion), slightly higher than our projection of RM100.0 billion to RM110.0 billion. Yield curves continued to flatten across the AAA and AA-rated but steepened in the A-rated spectrum. 

MARC Rating Activities     
 

In December, MARC assigned preliminary ratings of A+IS to Tan Chong Motor Holdings Berhad's RM1.5 billion Islamic Medium-Term Notes (Sukuk Murabahah) Programme. MARC withdrew the ratings of AAAIS  on Al-Bai'  Bithaman Ajil Islamic Financing Bonds of RM2.0 billion issued by Tenaga Nasional Berhad following the full redemption of the Islamic bonds upon maturity on December 13, 2021. MARC affirmed a total of 14 issue ratings with their stable outlook remaining largely unchanged. On the other hand, the outlook on Fortune Premiere Sdn Bhd's RM3.0 billion Multi-Currency Islamic Medium-Term Notes Programme (Sukuk Murabahah) was revised to negative from stable. MARC downgraded the ratings of Serba Dinamik Holdings Berhad's Islamic Medium-Term Notes Programme (IMTN) to CIS from BBIS /Negative. MARC also downgraded its rating on Senai-Desaru Expressway Berhad's (SDEB) RM1.89 billion Islamic Medium-Term Notes Programme (Restructured Sukuk) rating to BBIS from BBB-IS.

Foreign Holdings of Local Bonds     

In December, foreign investors turned net buyers of local bonds amid risk-on sentiment and steady global economic recovery. The net foreign inflows of RM 6.2 billion offset the outflows in the preceding month (Nov: -RM3.5 billion), thus bringing total foreign holdings to RM256.6 billion (Nov: RM250.4 billion), the highest magnitude since August 2014. Consequently, the share of foreign holdings rose in December to 14.7% of total outstanding (Nov: 14.4%). GII led debt securities inflow by RM3.9 billion, followed by MGS inflow of RM2.4 billion. On the other hand, corporate bonds flow moved to the negative territory in December with a decrease of RM0.1 billion in foreign holdings. In tandem with the net foreign inflow, the ringgit appreciated RM4.1760 against the USD (November: RM4.2265).

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