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CLICK TO ENLARGEPETALING JAYA: The domestic bond market is bound to see more positive activities following the boost from the removal of Malaysia from FTSE Russell’s watch list.
Malaysia has been on the list since April 2019 and every FTSE Russell review since then has kept bond investors on their toes as they feared Malaysia’s possible removal from the World Government Bond Index (WGBI).
Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz (pic below) said Malaysia has been part of the WGBI since July 2007 and its reaffirmed position in WGBI is a testament to various effective policies and initiatives aimed at continuously improving market accessibility and liquidity.
“The MoF has also actively participated in many stakeholder engagement sessions in collaboration with Bank Negara and Financial Markets Association Malaysia (FMAM) to shape policies on improving Malaysia’s financial market competitiveness, underscored by enhanced governance and transparency through streamlined compliance, regulatory and operational requirements for both domestic and foreign investors, ” he said in a statement.
Since end-April 2019, the statement said that the cumulative foreign flow into Malaysia’s government bond market amounted to RM48.6bil, of which RM22.7bil was between end-April and December 2019, RM17.2bil in 2020 and RM8.8bil from January to end-February this year.
As at end 2020, more than half of the total foreign holdings in government bonds comprised consists long-term investors such as other central banks and governments at 31.5%, pension funds at 17.7% and insurance companies at 2.6%.
AmBank Group chief economist Anthony Dass (pic below) said the news injected much positivity into the Malaysian bond market, which has been “underweight” due to it being in the list.
“Our market will now move into the ‘overweight’ region.
“This should see more appetite from investors abroad. Now with the FTSE Russell at the back of our mind, the focus will be on the US Treasury movement, ” he said.
Malaysia’s bond market had a spectacular run in 2020 due to the downward revisions of the overnight policy rate (OPR), resulting in interest rates at multi-year lows..
And while analysts have been expecting the yields to rise, it happened earlier than expected since mid-February, tracking the US 10-year Treasury in particular.
A dealer told StarBiz that investors were cautiously optimistic in the bond market yesterday as US 10-year Treasury yields continued inching up although there was strong local demand and some foreign inflow where the 20.5-year new Government Investment Issue (GII) was well received with a solid bid-to-cover ratio of 2.56 times.