PETALING JAYA: The escalation of the US-China trade war continued to affect Malaysian equities and debts in May with foreign portfolio outflow totalling RM6.2 billion, according to UOB Global Economics & Markets Research.
This marked the second month of foreign portfolio outflows and was in line with the US$5.7 billion of portfolio outflows from emerging markets during the month.
“The outflows weighed on ringgit sentiment, as the local currency weakened by 1.3% to 4.1900 against the US dollar last month,” it said in a note today.
In May, the renewed risk-off sentiment prompted foreign investors to pare down their Malaysian equities by RM2 billion from the RM1.4 billion outflow in April.
Foreign selling of Malaysian debt securities slid to RM4.2 billion in May from RM9.8 billion in the previous month.
Of the RM4.2 billion bond outflows, Malaysian Government Securities (MGS) made up the biggest portion with an outflow of RM3.8 billion in May, followed by Government Investment Issues (GII) (-RM500 million) and Treasury bills (-RM10 million).
Following that, it trimmed foreign holdings of Malaysian government bonds (MGS & GII) to RM158.0 billion or 20.9% of total outstanding (from RM162.3 billion or 21.9% in April), the lowest since September 2010.
However, overseas investors turned net buyers of private debt securities and private sukuk at RM68.5 million and RM25.8 million respectively in May.
UOB said the sell-off in the equity market continued for the fourth month, bringing the year-to-date outflows to RM4.8 billion.
“As such, foreign shareholdings of Malaysian equities fell to a 17-month low of 23.2% in May (from 23.4% in April).”
The research house said as the outcome of the trade negotiations remains uncertain, some central banks have started to loosen monetary policy.
“We have brought forward our US Fed rate cut expectations to Q3 2019 from Q3 2020 previously. We expect a 25-basis-point (bps) cut in Q3 2019 and another 25 bps in Q4 2019, bringing the upper bound of the Fed funds target rate to 2.0% by end-2019.”
However, UOB expects Bank Negara Malaysia to adopt a wait-and-see stance and keep rates on hold for now, given that is has undertaken a pre-emptive policy rate cut of 25bps to 3% last month.
KUALA LUMPUR: RHB Investment Bank Bhd has topped the issued value league table of the Malaysian Rating Corp Bhd-rated (MARC) debt and sukuk programmes/issuances, with CIMB Investment Bank Bhd coming in second and AmInvestment Bank Bhd in third place.
The issue count league table of MARC-rated debt and sukuk programmes/issuances was also headed by RHB Investment Bank Bhd. AmInvestment Bank Bhd was the runner-up, followed by Affin Hwang Investment Bank Bhd.
Noteworthy deals rated by MARC in 2018 included the RM415 million green bonds for Segi Astana, representing the first ringgit-rated bonds issued under the Asean Green Bonds Standards, and the RM245 million green sukuk for Sinar Kamiri, the first green SRI Sukuk Wakalah for a listed company in Malaysia.
To deepen its role in increasing the awareness towards creating sustainable impact, MARC introduced the Impact Bond Assessments (IBA) in July 2018. The IBA methodology assesses green, social and sustainability bonds, including sukuk, which are issued under Malaysia’s Sustainable and Responsible Investment Sukuk Framework.
Published annually, MARC’s Lead Managers’ League Tables provide a measure of domestic corporate and project bond and sukuk issuance for the year. The league tables rank the lead managers by volume and number of lead-arranged MARC-rated issuances in any given year.
KUALA LUMPUR: Global sukuk issuance reached US$39.5 billion (RM164 billion) at end-March, with Malaysia maintaining its leadership, accounting for 35.1% or US$13.9 billion of the issued amount.
Indonesia and Saudi Arabia came next, with respective shares of 17% or US$6.7 billion and 15.3% or US$6.1 billion, according to RAM Ratings.
In a statement today, the rating agency said a total of US$12.8 billion of sukuk was issued globally in March.
RAM head of Islamic finance Ruslena Ramli pointed out that a 38% year-on-year jump in global sukuk issuance bodes well for the pace of this segment’s performance in 2019.
“Key markets to watch are Indonesia, as the nation gears up for sovereign sukuk issuances in line with its sustainability agenda, and Saudi Arabia, whose persistent budget deficits may lead to a higher percentage of sukuk in its government funding mix,” she said.
RAM Ratings expects Malaysia to remain at the forefront as an issuer, providing stability to the overall base of global sukuk issues.
Malaysia recorded a 54.4% spike in sukuk issuance as at end-March 2019, compared with US$9 billion a year earlier, driven by the introduction of Bank Negara Malaysia’s Interbank Islamic Bills (BNIB-i) issuances.
RAM Ratings said it expects the BNIB-i issuances to grow further in 2019, due to its recognition as a high quality liquid asset.
“On the domestic front, outstanding sukuk rose 10.5% to RM880.3 billion as at end-March, and maintained its position as a leader in the Malaysian bond market, accounting for 60.9%.
“Notably, its share has been trending upwards since hitting 50% in 2013,” it said.
A total of RM22.3 billion of domestic sukuk was issued in March, bringing the year-to-date issuance value to RM64.1 billion at month-end.
The rating agency said the financial services, as well as the infrastructure and utilities sectors were the chief drivers of the domestic sukuk market, with respective issuance values of RM11.4 billion and RM3.6 billion in the first quarter.
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PETALING JAYA: The RM6.2 billion financial assistance to ailing Federal Land Development Authority (Felda) will add to the government’s debt burden, which is already significantly above the median of A-rated sovereigns, a credit negative, said Moody’s Investors Service.
“We estimate that the assistance will raise the government’s debt burden by 0.3% of GDP to 56.0% in 2019, substantially higher than median debt ratio for A-rated sovereigns of 37.8%, and up from 50.7% in 2017,“ it said in a report today.
In its estimates, Moody’s included the debt of state-owned investment fund 1Malaysia Development Bhd and the RM20 billion of funding provided to state-owned pilgrimage fund Tabung Haji at the end of last year through an asset-backed sukuk.
“A higher debt burden will weigh on Malaysia’s debt affordability, particularly because the share of revenue to GDP, at 16.3% in 2018, is likely remain at or near record lows. Interest payments account for 13.3% of revenue, significantly higher than the A-rated median of 4.0%.”
Felda was established in 1956 to manage the resettlement of the rural poor and employ them in Malaysia’s palm oil industry, but it has evolved into a financially independent statutory body supporting broader socio-economic development.
Its financial performance has been deteriorating since 2013. In 2017, its losses reached RM4.9 billion, compared to an average profit of RM700 million in the five years leading up to the listing of its commercial arm, FGV Holdings Bhd, in 2012, because of declining operating income from plantations due to lower palm oil prices, financially unviable investment decisions, alleged corruption and weak governance practices. Since then, its total liabilities have more than doubled to RM14.4 billion from RM6.5 billion.
Former Felda chairman Tan Sri Isa Samad has been charged with bribery linked to a hotel purchase and FGV Holdings has sued Isa and former CEO Datuk Mohd Emir Mavani Abdullah over the purchase of two luxury condominium units allegedly for above market price.
With its cash balance shrinking, Felda is unlikely to be able to meet its debt obligations without the government’s assistance. It recorded a loss of RM4.6 billion in earnings before interest and tax in 2017.
The financial aid announcement followed the release of a white paper that detailed the company’s deteriorating financial performance, and outlined plans to restore its viability and strengthen its governance practices.
The government plans to spread its aid over seven years. Felda will raise about half of this, which will be backed by government guarantees, while the remainder will come from loans and grants.
MANILA: Cagamas Bhd, the National Mortgage Corp of Malaysia and Philippines’ National Home Mortgage Finance Corp (NHMFC) have sealed a memorandum of cooperation (MoC) to jointly explore housing financing methods to promote home ownership in their respective countries.
Cagamas president/CEO Datuk Chung Chee Leong said the MoC marks an important milestone in the collaboration between Cagamas and NHMFC.
“Cagamas welcomes this initiative which aims to enhance the strategic cooperation between Malaysia and Philippines, including amongst others, research and knowledge sharing related to housing finance. This initiative is in line with both institutions’ mandate to develop the secondary mortgage finance market,” Chung said in a statement today.
The MoC enables the wealth of domestic experience in housing finance, mortgage and financial instruments to be mutually exchanged between Malaysia and the Philippines. This is expected to enhance the stability of housing and mortgage markets, mortgage backed securities as well as other funding instruments to leverage private capital to the housing market.
Cagamas is the second largest issuer of debt instruments after the government of Malaysia and the largest issuer of ‘AAA’ corporate bonds and sukuk in the market. Since incorporation in 1986, Cagamas has cumulatively issued RM319.1 billion (US$96 billion) worth of corporate bonds and sukuk.
“We are more than elated with this new seal of cooperation with NHMFC’s counterpart from our neighbour country, Malaysia’s Cagamas. This MoC espouses our aim to create a syariah-compliant pool of assets through Islamic housing finance,” NHMFC president Dr Felixberto U Bustos Jr said during the event.