Malaysia Bond and Sukuk : Quarterly Report 3Q2020

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3Q2020 – Rise in Bond Supply and Foreign Holdings

As economy reopened since May after three-month of movement restriction, the 3Q20 GDP improved with smaller contraction by 2.7% compared to 2Q20 with 17.2% contraction. The unemployment rate also improved from 4.9% in June to 4.6% in September. Overall MGS and GII declined in September due to concern on FTSE WGBI announcement. The FTSE decided to keep Malaysia’s bond in the index and next review will be in March 2021.
 

GLOBAL MARKET
Overview
There is a slight change in q-o-q UST yields ranging from 1 bps – 2 bps lower, save for 10Y. The Fed Funds Rate stay pat at 0.00-0.25% since March.

MY Government Bond
Overview
MGS/GII yields rally q-o-q by 19 bps- 39 bps higher across the curve. The yields declined in September as concern about FTSE WGBI announcement on potential exclusion. The overnight policy-rate was cut by 25bps in July meeting and maintained at 1.75% in September meeting.

MY Corporate Bond & Sukuk
Overview
Corporate AAA-segment rally across maturity between 28 bps to 43 bps. The corporate bond issuance during the quarter increased by 45%.
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GOVERNMENT BOND AUCTION
Overview

 
Demand for MGS/GII in 3Q20 auction weakened with average BTC fell to 1.983x (2Q20: 2.245x). The long-term 30Y GII 11/49 received the lowest BTC at 1.358x. The highest BTC recorded was at 2.803x by 5Y MGS 09/25. Gross issuance of MGS/GII in 3Q20 total RM 44.6 billion (2Q20: RM 30.5). As of September 2020, MGS and GII outstanding amount stood at RM 802.52 billion (2Q20: RM 772.73 billion). Covid-19 pandemic necessitates an expansionary fiscal policy. A RM 295 billion stimulus package was announced to mitigate the impact of Covid-19. The government has revised target fiscal deficit to 6% of GDP from 3.2% and increased its statutory debt to 60% from 55% of GDP.

3Q20 AUCTION

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Source BNM, BIX Malaysia
 
There will be three MGS issuances and four GII issuances in 4Q20. One PROFIT-BASED GII 6/2010 30.11.2020 with RM 3.0 billion outstanding amount will mature in November 2020.  

UPCOMING ISSUANCE 4Q20

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Source BNM, BPAM, BIX Malaysia
 

FOREIGN HOLDINGS OF MGS AND GII
Overview 

MGS/GII experienced consistent net inflow from foreign investors during the quarter. There were RM 7.8 billion, RM 3.1 billion and RM 1.1 billion net inflow respectively in July, August, and September. By the end of 3Q20, foreign holdings of MGS/GII stood at RM 189.38 billion (June 2020: RM 177.44 billion), a 6.7% increase from the previous quarter.

In the midst of a low-interest rate environment, investors are hunting for higher yields. Malaysia is among the highest real yield at 3.15% as of October 2020.

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CORPORATE BOND & SUKUK
Overview 
 
For the 3Q20, the corporate segment issued RM 24.66 billion bond and sukuk, a 45% increase from the previous quarter (2Q20: RM 16.94 billion). The year-to-date total corporate issuance is amounted RM 63.64 billion. Issuance from corporate bond is expected to increase in a low-interest rate environment.

By ratings (excluding government-guaranteed and non-rated), AAA-rated bond is the most issued with the total amount of RM 14.57 billion. The second most issued is AA3-rated bonds with the issuance amount of RM 10.16 billion. The biggest issuance is TENAGA IMTN 3.550% 10.08.2040 by Tenaga Nasional Berhad with the amount of RM 1.50 billion.







 


ISSUANCE 3Q2020

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Source BNM, BIX Malaysia


RATING OUTLOOK
 
There are 2 upgraded and 0 downgraded bonds/sukuk in 3Q20.
 
Upgrade
  1. WIDAD CAPITAL SDN BHD
  2. PREMIER AUTO ASSETS BERHAD


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Source: MARC, RAM and BIX Malaysia


BOND STATISTICS
Overview 

Outstanding Amount by Bond Classes
 

As of September 2020, the outstanding amount of Malaysian bonds is at RM 1.44 trillion, 3.6% increase from the previous quarter (June 2020: RM 1.39 trillion), with government bonds dominate by 57% of the outstanding amount. Corporate bond made up 25%, while Quasi-government made up 18% of the total outstanding amount.

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BOND STATISTICS
Overview 

Outstanding Amount by Principal and Bond Classes
 
As of September 2020, the outstanding amount of the Government conventional bond was at RM 433.42 billion (2Q20: RM 420.63 billion) and the Government Islamic bond (Sukuk) at RM 393.20 billion (2Q20: RM 378.90 billion). The conventional Quasi-Govt have lower outstanding amount of RM 14.28 billion than in previous quarter (2Q20: RM 17.62 billion) indicating more redemption than issuance in 3Q20 for this segment.
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BOND STATISTICS
Overview 

Outstanding Amount by Credit Classes
 
As of September 2020, AA-rated bonds had the highest outstanding amount at RM 182.65 billion (June 2020: RM 164.74billion). This AA-rated surpassed the outstanding amount of AAA-rated bond who was the highest in 2Q20. AAA-rated bond in 3Q20 outstanding amount was RM 164.09 billion (2Q20: 173.45 billion). For non-investment grade bonds, the cumulative outstanding amount of BB-rated bonds and below was static at RM 2.8 billion (June 2020: RM2.8 billion).

Disclaimer

This report has been prepared and issued by Bond and Sukuk Information Platform Sdn Bhd (“the Company”). The information provided in this report is of a general nature and has been prepared for information purposes only. It is not intended to constitute research or as advice for any investor. The information in this report is not and should not be construed or considered as an offer, recommendation or solicitation for investments. Investors are advised to make their own independent evaluation of the information contained in this report, consider their own individual investment objectives, financial situation and particular needs and should seek appropriate personalised financial advice from a qualified professional to suit individual circumstances and risk profile.

 The information contained in this report is prepared from data believed to be correct and reliable at the time of issuance of this report. While every effort is made to ensure the information is up-to-date and correct, the Company does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information contained in this report and accordingly, neither the Company nor any of its affiliates nor its related persons shall not be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.
 
 
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