by AZALEA AZUAR
THE Finance Ministry’s Economic Outlook for 2024 reveals a robust performance in the capital market, with gross funds raised surging by a projected 11.4% to RM184.1 billion. This surge can be attributed to an increase in fundraising activities across both public and private sectors.
Within the private sector, gross funds raised through new corporate bonds saw a remarkable 11.8% increase, totaling RM67.1 billion. This surge was primarily driven by medium-term notes (RM65.3 billion), straight bonds (RM1.02 billion), and Islamic bonds (RM865.6 million), even in a more stringent financing environment.
“Most of the funds were raised by finance, insurance, real estate, and business services accounting for 55.6%; electricity, gas, and water (21.8%); and construction (9.3%) sectors. “These funds were primarily used to finance working capital, new projects, and refinancing,” it said in the report.
On the other hand, the domestic equity market recorded RM2.9 billion in the same period, driven by IPOs.
The new issuances in Main and ACE Markets include consumer, industrial, construction, technology, property, and healthcare products will boost investment opportunities and domestic equity market vibrancy.
Moreover, Malaysian Government Securities (MGS) and Malaysian Government Investment Issues (MGII) issuances increased by 8.3% to RM57.4 billion and 13.5% to RM56.6 billion, respectively, reflecting the government’s financial requirements and maturity profile. Foreign holdings remained at 36.6% (MGS) and 10.2% (MGII), respectively, as at the end of July.
“Malaysia’s debt market continued to be supported by a diverse group of institutional and foreign investors, complemented by the deep and liquid secondary bond market,” it added.
In the first seven months of 2023, MGS and corporate bond yields declined across all tenures which was driven by market expectations of policy rate peaking and global macro developments.
Market expectations of the policy rate reaching its peak led to a decrease in benchmark yields on one-year, three-year, five-year and 10-year MGS by two basic points (bps), 18bps, 26bps and 26bps, respectively.
Global macro developments, including US inflation easing and banking turmoil influenced the trend, with one-year, three-year, five-year and 10-year MGS yields closing at 3.24%, 3.49%, 3.60% and 3.83%, respectively.
Corporate bond yields decreased for AAA-rated (42bps), AA-rated (42bps), and A-rated securities (10bps), while BBB-rated corporate bond yield increased by 21 bps and closed at 7.01% during the first seven months of 2023.
“Nonetheless, Malaysia’s BBB-rated corporate bond yield trended slightly higher, driven by investors seeking corporate bonds with relatively safer credit ratings in light of risk-off sentiment following US banking distress.
“Overall, the yield trend in the corporate debt market generally points towards the expectation of lower interest rates, signalling lower borrowing costs, which will be an advantage to many businesses,” it said.