KUALA LUMPUR: Foreign ownership of government securities continued trending upwards in March 2015, increasing 4.1% month-on-month (m-o-m) in value, said RAM Rating Services Bhd (RAM Ratings).
In a statement yesterday, RAM Ratings said the rebound has been observed since December, and has brought the proportion of foreign holdings of government securities to 29%.
“The return of foreign interest also helped maintain a healthy bid-to-cover ratio for government securities tendered in March,” the rating agency said.
Meanwhile, private debt securities issuance finally picked up pace with RM8.1 billion coming to the market in March, after two lethargic months. The bulk of this originated from financial institutions and the construction sector, said RAM Ratings.
As part of RAM Ratings’ quarterly review of its monetary and financial forecasts, its expectations vis-à-vis inflation and the ringgit/US dollar exchange rate have been revised accordingly this month.
It explained that low core inflation in the first quarter of 2015, along with larger–than-expected downward pull of the transport component in the Consumer Price Index basket on headline numbers, had brought down its inflation projection to 2.5% for 2015.
“Likewise, the persistent downward pressure on the ringgit, and heightened volatility arising from both domestic and external uncertainties, have weighed on our projections.
“In anticipation of further market volatility and the continued normalisation of US dollar-denominated assets in the near term, we expect the average ringgit/US dollar exchange rate to trend lower to 3.70 this year,” RAM Ratings said.
Meanwhile, IFR reports that the Malaysian government has drawn orders of US$6.5 billion (RM24 billion) for its offering of 144A/Reg S sukuks, and the book is growing as European markets open for business. Price guidance on the dual-tranche offering of 10- and 30-year sukuk yields is around 135 basis points (bps) and 185bps respectively over US Treasuries. The 144A/Reg S offering follows a week of roadshows that ended in New York on Tuesday evening.
Joint leads CIMB, HSBC and Standard Chartered are using the outstanding bonds of state-owned Petroliam Nasional Bhd (Petronas) as references. Petronas’ US$1.5 billion 3.5% due 2025 is quoted at 126bps over US Treasuries, or a cash price of 102.700, while its 4.5% sukuk due 2045 is at 175bp, or 103.585.
Based on guidance alone, the sovereign is providing a small pick-up, but, if demand proves robust, this is likely to be narrowed.
This article first appeared in The Edge Financial Daily, on April 16, 2015.