BPA Malaysia weekly bond market report 4 February 2018

Trading activities in the ringgit market was muted during the holiday-shortened week. The MGS yield curve flattened with yields in the short end of the curve edged higher by three bps while yields from the five-year to 10-year region of the curve decreased by 1bps to 3bps.

Meanwhile, for 15-year curve point and above, MGS yields ended higher by 1bp to 4bps with the exception for 20-year MGS which shed 2bps. As a result of the mixed movements, the TR BPAM All Bond Index gained 0.063 per cent, ending the week at 156.638 points compared to 156.539 points a week ago.

The US Federal Reserve (Fed) concluded its ’s Federal Open Market Committee (FOMC) meeting on Wednesday by leaving its benchmark interest rate unchanged at 1.25 per cent to 1.50 per cent.

The policy statement had a hawkish tone as the Fed expects that would pick up in the coming months. The Fed is expected to hike the benchmark interest rate during its meeting in March.

The total trade volume of the top 10 most actively traded bonds declined substantially to RM5.6 billion from RM9.5 billion last week due to the holiday-shortened week.

The 5-year benchmark MGS maturing on March 10, 2022 topped the list with RM892 million transacted.

On February 2, 2018, Bank Negara () announced the tender details for the RM3 billion new 7.5-year benchmark MGII maturing on August 15, 2025. An additional RM1 billion will be privately placed. The tender will close on February 6, 2018.

On January 30, 2018, Sinar Kamiri Sdn Bhd (SKSB) issued 17 tranches of with total issuance size of RM245 million. The tenures range from two-year to 18-year with profit rates of 4.96 per cent to 6.35 per cent. The are rated AA-IS with a stable outlook by .

SKSB, wholly-owned subsidiary of Mudajaya Group Bhd, was solely set up to undertake the development and operations of a greenfield generation facility with a capacity of 49.0MW in Sungai Siput, Perak.

On January 29, 2018, RAM Ratings has downgraded the rating of Lafarge Cement Sdn Bhd’s (LCSB) RM500 million Sukuk Wakalah Programme (2017/2024) to A1 from AA2 while the outlook has been revised to stable from negative.

LCSB is a wholly owned subsidiary of Lafarge Malaysia Bhd (Lafarge Malaysia or the Group) – the largest cement manufacturer in Peninsular Malaysia by capacity – and is the Group’s primary cement sales and marketing arm.

Given its importance to Lafarge Malaysia, RAM Ratings have equated LCSB’s sukuk rating to that of Lafarge Malaysia.

The downgrade in ratings is due to the sharp deterioration in Lafarge Malaysia’s financial performance and debt-servicing metrics amid the challenging operating environment.

Depressed demand, industry overcapacity and intense price competition coupled with high operating cost has resulted in three quarters of operating losses amounting to RM175.4 million in 9MFY17.

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Source: Borneo Post Online

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