Malaysia's bond market is likely to remain vibrant but will see lower issuance on moderation in overall economic activity.
“2012 was a bumper year. In the first half of the year, private debt issuance amounted to RM29.9 billion.
The bulk of it comes from the power generation sector, followed by real estate, plantation and financial services,“ said Maybank Investment Bank Bhd vice president and head of fixed income research Tan Chee Wee.
He noted that the current ratio of government to corporate bonds stands at 55:45.
“There should be more bond issuance in the second half of this year, given the current low-yield environment,” he told reporters on the sidelines of “The Asean Fixed Income Roadshow” organised by Bloomberg LLP here yesterday.
“By year end we expect this figure to pick up pace and possibly hit the range of RM70 billion to RM80 billion.
"Malaysia’s resilient domestic demand and sustained fiscal support will underpin the growth of Malaysia’s bond market, which is currently the biggest in Asean,” he added.
This forecast is good, considering from 2008 to 2011 the average annual gross issuance was RM60.1 billion.
When asked to forecast performance of bond market, he said: “The market is very vibrant and liquid. We think the 5-year bond yield still has room to rise from 3.32 per cent by another 5 to 10 basis points,” he said.
Yesterday, Malaysian Rating Corp Bhd’s (MARC) in its “2H2013 Malaysia Bond Market Outlook” revised its earlier projection of gross corporate bond issuance to RM70 billion-RM85 billion for 2013 from between RM75 billion and RM90 billion initially.
This is due to lower issuance in the first half of this year, slower growth in private investment and the moderation in overall economic activity.
Last year, Malaysia’s bond market posted a record last year, when corporate bond issuance more than doubled to RM124.6 billion from RM55 billion recorded in 2011.
The report also said in view of the government’s debt-to-GDP ratio stands at about 53 per cent, which is close to the self-imposed debt ceiling of 55 per cent, it expects Malaysian Government Securities (MGS) and Government Investment Issues (GII) bond issuance to total between about RM90 billion and RM95 billion for 2013.
After excluding MGS/GII that have been redeemed in the first half of the year and maturing over the next six months, MARC expects the net issuance to be in the range of RM39.4 billion to RM44.4 billion.
Last week, five banks in Southeast Asia took the initiative to spur more active bond trading by quoting and distributing bond prices in their domestic markets via Bloomberg terminals.
They are Malaysia’s Malayan Banking Bhd (Maybank), PT Bank Negara Indonesia, Security Bank of the Philippines, Thailand’s Kasikornbank and Singapore’s Overseas Chinese Banking Corp (OCBC).
The bond trading portal, facilitated by Bloomberg terminals, will help to create transparency and integrate southeast Asia’s capital markets.
Nitin Jaiswal, head of Asean sales for Bloomberg, said there are plenty of local banks in Asean countries with strong balance sheets that were looking to “step out of their own market” when it comes to putting money into bonds.
“We felt we should start a portal where banks can go and find out which markets they should be investing in. Now, they will be able to find those names, see the indicative price and negotiate trade from there,” Jaiswal said.