CREDIT ANALYSIS REPORT

Monthly Bond Market and Rating Snapshot - June 2022 - Full Report

Report ID 6053890046837 Popularity 386 views 23 downloads 
Report Date Aug 2022 Product  
Company / Issuer Fixed Income BM Update Sector Bond Market Update - Bond Market Update
Price (RM)
Normal: RM300.00        
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Rationale
Malaysian Government Bond Market    
 
Total MGS/GII outstanding grew further to RM962.3 billion at end-June from RM947.3 billion at end-May. Meanwhile, new issuance of GII papers dropped to RM4.5 billion from RM8.0 billion recorded in May. There was no redemption of government bonds for the second consecutive month. In 1H2022, total gross MGS/GII issuance came in higher at RM87.5 billion (1H2021: RM80.5 billion), which is within our projected range of RM170 billion to RM180 billion for the whole of 2022. Government bond auctions continued to see decent reception in June, with BTC ratios exceeding 2.0x. The sale of the RM4.5 billion 5y GII drew the strongest demand (BTC ratio: 3.1x), mainly from local institutional investors. A total of RM10.0 billion was raised through three public offerings, and another RM5.0 billion was raised via two private placements. Going into 2H2022, there are 17 remaining scheduled debt offerings based on the 2022 auction calendar, consisting of eight offerings via MGS, while the rest will be from GII issuances.

Malaysian Corporate Bond Market     

In June, gross issuance of local corporate bonds came in higher at RM13.7 billion after declining sharply to RM4.1 billion in May. The upsurge was mainly attributed to a rise in the volume of rated corporate bond issuance (Cagamas included), which increased to RM12.3 billion from RM3.7 billion in the previous month. Meanwhile, fundraising activities from the unrated corporate bond segment were at RM1.4 billion, up from RM0.4 billion recorded previously. There was no issuance from the quasi-government segment for the second consecutive month. In 1H2022, total gross corporate bond issuance stood at RM52.5 billion, a drop of 11.8% relative to RM59.5 billion recorded in the corresponding period last year. The decrease was attributed to lower issuances in the quasi-government segment, which almost halved to RM6.7 billion from RM12.2 billion in the same period last year.

Foreign Holdings of Local Bonds     

Foreign investors offloaded local bonds in June amid the aggressive rate hikes of 75bps by the US Fed and global risk-off sentiment. June recorded the highest foreign outflows, amounting to RM4.1 billion. Consequently, total foreign holdings further shrank to RM253.3 billion (May: RM257.5 billion). The majority of foreign holdings’ share diluted significantly in June. MGS’ foreign share of total outstanding shrank to 36.5% (May: 37.4%), the lowest since May 2020. GII and MTB also followed suit with a narrower foreign share of 23.9% (May: 24.7%) and 55.8% (May: 60.6%). The net foreign outflows of RM4.1 billion in June completely offset the cumulative net foreign inflows of RM911 million recorded from January to May 2022. As such, the cumulative foreign flows currently stand in the negative territory at RM3.2 billion, which was last experienced in June 2020.

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