KUALA LUMPUR (April 1): The issuance of Malaysian Government bonds is expected to increase to RM160 billion this year from RM149 billion last year, according to foreign fund management company Amundi Malaysia.
Chief investment officer for fixed income and global sukuk Tutiana Jusat said in complying with the 60% debt to Gross Domestic Product (GDP) ceiling and maintaining a budget deficit below 6% this year, an increase of around RM10 billion for a total issuance size of RM160 billion is within reach.
Even before FTSE Russell decided to keep Malaysian Government bonds on the FTSE World Government Bond Index, foreign investors were buying Malaysian Government Securities and Malaysian Government Investment Issue for 10 consecutive months, she said.
She said this was due to general investors’ confidence in Malaysia, among others.
“The bond carries high yields, it may not lure foreign investors, for example, Indonesia, as the long-term government yields did not attract bond inflows recently.
“Probably because the investors are concerned about the central bank’s role in financing fiscal deficit and mitigating the impact of higher United States yields on government and companies that have been raising external debt.
“So, for us, these are very limited but the downside of having higher foreign ownership in domestic bond is its impact on external debt,” Tutiana said at the 2021 Bank Negara Malaysia Governor’s Address and Panel Discussion, held online and organised by the Malaysian Economic Association, today.
Tutiana highlighted that Malaysia’s external debt to GDP ratio rose mainly due to an increase in non-resident holdings of government domestic bonds and issuance of international bonds by corporates.
“This was partly offset by exchange rate valuation following the stronger ringgit last year and the external debt remains manageable,” she noted.
However, she said there were downgrade risks by rating agencies if there were a weakening in government debt and debt affordability metrics.
On the domestic corporate bond market last year, she said the financial sector was the highest issuers, followed by infrastructure and utility industries.
“We expect the same trend this year and there is also a greater shift towards issuing sukuk as Malaysia remains a global leader in Islamic finance,” she said.
