KUALA LUMPUR: Foreign investors were net buyers of RM1.2bil of Malaysian Government Securities (MGS) and Government Investment Issues (GII) in November after two consecutive months of net selling, said RAM Ratings Services Bhd.
According to the ratings agency, this was due to the US Federal Reserve's less hawkish message in early November, which reignited interest in local currency emerging market (EM) bonds last month.
"This was, however, offset by the outflow from MTB and MITB (RM2.5 bil), which could be attributed to foreign investors’ inability to roll over funds into fresh papers given lumpy maturities and relatively muted new MTB and MITB issuances over the last two months," it said in a statement.
The overall fund flow remain negative at minus-RM1bil in November, which was narrowerd than a deficit of RM6.3bil in October.
"There were, however, some slight market jitters in mid-December as the Fed dispelled speculations of a potential rate cut next year in spite of the weakening of the US economy," said RAM Ratings.
It said based on the Fed’s "dot plot" for December, the central bank expects interest rates to reach 5-5.25% in 2023, higher than its projection of 4.5-4.75% in September.
According to RAM Ratings, MGS and GII issuance remained robust at RM15bil in November, which brought total issuance in the first 11 months of 2022 to RM163bil.
This was in line with RAM Ratings' forecast of RM165-175bil in 2022.
For 2023, the ratings agency projects MGS and GII issuance to rise to RM170-180bil after taking into account the government's larger deficit financing requirement as well as the refinancing of debts maturing next year.
Meanwhile, RAM Ratings said corporate bond issuance is likely to come in near the upper end of its estimated range of RM110-120bil this year.
It expects overall bond issuance to reach RM120-130bil in 2023 due to private refinancing initiatives, continued infrastructure financing needs and financial institutions' capital augmentation plans.
