Kuala Lumpur: The Malaysian bond market charted its seventh consecutive month of net foreign inflow in November at RM1.9 billion, led by Malaysian Government Securities (MGS) and Malaysian Government Investment Issues (MGII) at RM2.7 billion.
RAM Ratings Services Bhd in a statement Friday said that the sturdy foreign appetite lifted the year-to-date inflow to RM14.8 billion as of end-November 2020, 25 per cent higher than the corresponding period in the previous year.
“Foreign holdings as a percentage of total bonds outstanding rose to 13.6 per cent – the highest level since January 2020. This was underpinned by improving sentiments and yield hunt amid low global interest rates,” it said.
Despite steady foreign demand, yields still rose across the board in November, it said.
“Investors had likely priced in higher market risk arising from the myriad uncertainties over the US presidential election and domestic political turmoil that had threatened to derail the passing of Budget 2021.”
The ratings agency also said that domestic yields may have also faced upward pressure amid tighter market liquidity, as the turnover ratio for MGS/GII averaged at 0.059 in November; the lowest since December 2018.
Meanwhile, it said that any reaction following the recent sovereign downgrade by Fitch Ratings on December 4 appears rather muted and short-lived as the yields of the 10-year MGS had initially trended slightly upwards at the start of the week but soon reversed to end 2.4 basis points lower than the previous week.
“Following Fitch Ratings’ downgrade, investors may be more wary of potentially similar rating actions from the other two rating agencies further down the line. Another downside risk stems from FTSE Russell’s evaluation of Malaysia’s watchlist status at its next review in March 2021,” it added.
