Corporate bond issuance likely to surpass RM100b this year

PETALING JAYA: Total gross corporate bond issuance will more than likely surpass RM100 billion this year, according to RAM Ratings.

RAM said last month, the gross corporate bond issuance had already surpassed the lower limit of its RM90-RM100 billion forecast for 2018.

“As at end of November, this number had almost reached the upper limit of our projection, following an additional RM8.8 billion of corporate issuance that brought year-to-date (YTD) issuance to RM99.5 billion,” it said in a statement.

However, the rating agency said it anticipates that gross corporate issuance to moderate to RM70-RM80 billion in 2019.

“One of the clear trends in this post-GE14 era is that quasi-government debt papers will no longer be able to prop up corporate bond issuance in 2019; the market is already experiencing a slowdown in such issuance,” RAM said.

Compared to the YTD gross issuance in 2017, RAM said the current lower issuance value is attributable to more subdued quasi-government issuance this year.

“We also observe a clear moderation in the issuance of infrastructure-related debt securities. We expect this trend to continue as the government maintains its stance on rationalising the country’s debts through more stringent management of project costs and timelines,” it added.

Meanwhile, RAM said it was not surprised by RM5.2 billion of foreign bond outflows in November after recording RM7.8 billion of inflows as a result of a readjustment of the bond composition of the JPM GBI-EM Index.

This was given the myriad developments during the month, which had prompted foreign investors to park their funds elsewhere.

“If not for some portfolio rebalancing by index-based investors, the scales would be tipped towards even greater outflow pressure going forward. Lingering global uncertainties over the US-China trade spat and Brexit outcome still take centre stage, fuelling global risk aversion,” RAM’s head of research Kristina Fong said.

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