KUALA LUMPUR (Nov 22): RAM Rating Services Bhd (RAM Ratings) expects corporate debt issuance to ease to RM70 billion-RM80 billion next year from RM90 billion-RM100 billion projected this year, primarily due to fewer infrastructure-related bond issues.

The rating agency said infrastructure-related bond accounted for 17 per cent of total issuance in the first 10-month period this year.

“The other contributing factor is the slower pace of quasi-government issuance amid the government’s project-rationalisation initiatives,” it said.

RAM Ratings said as of end-October, corporate debt issuance totalled RM90.8 billion, surpassing the lower end of the RM90 billion-RM100 billion projection for 2018 and appeared set to stay within its estimate.

On government debt issuance, the rating agency expected the government to ramp up the issuance of Malaysian Government Securities/Government Investment Issues (MGS/GII) by around RM10 billion on top of its original estimate of RM100 billion-RM110 billion, given the larger deficit tabled in the 2019 Budget.

“For 2019, we project MGS/GII gross issuance to remain stable at RM110 billion-RM120 billion,” it said.

Meanwhile, RAM Ratings said October charted a surprisingly large net foreign bond inflow of RM7.8 billion - the largest since September 2017.

“This can be largely attributed to a one-off technical adjustment in foreign investors’ portfolios in reaction to the change in the composition of Malaysian bonds in the JPMorgan Government Bond Index-Emerging Markets (GBI-EM) Index because of adjustments to the maturity rule.

“Following the rebalancing at end-October, there was a surge in demand for MGS, which was evident in the intra-day dip of 7.9 basis points in the 10-year MGS yield on Oct 31, a sharp break away from the uptrend throughout the rest of the month,” it said.

However, it said yields across the maturity spectrum, including the 10-year MGS, still rose month-on-month, indicating that investors are still not too bullish on Malaysia.

“The higher yields may be partly attributable to the downside risks stemming from volatile oil prices and the lingering weakness of the ringgit, along with the market’s concerns over a larger-than-budgeted fiscal deficit this year as announced via the 2019 Budget, and the uncertainty this brings to Malaysia’s sovereign ratings,” it added.