Malaysia 10-year yields at 4-year low

Malaysia’s 10-year bonds gained for a third day, driving the yield to the lowest level in more than four years, on optimism Prime Minister Datuk Seri Najib Razak’s election win will spur fund inflows.

The notes were headed for the longest winning streak in three weeks as Credit Suisse Group AG and HSBC Holdings Plc forecast inflows will increase following the result. Najib’s National Front coalition retained power at the May 5 poll with 133 of the 222 parliamentary seats, extending its 55-year rule.

"The market is more positive due to the removal of political uncertainty," said Ray Choy, regional head of fixed-income research in Kuala Lumpur at RHB Research Institute Sdn. "There’s pent-up demand from among overseas investors."

The yield on the 3.48 per cent securities maturing in March 2023 dropped three basis points, or 0.03 percentage point, to 3.3 per cent as of 12.39pm in Kuala Lumpur, according to data compiled by Bloomberg. That’s the lowest for a benchmark 10-year note since February 2009. Today’s decline is five times the average move in the past three months, the most among 22 emerging markets tracked by Bloomberg.

Global funds owned a record RM138 billion of local-currency government debt at the end of March, according to data published by Bank Negara Malaysia, a six per cent increase from the end of 2012.

Capital inflows should be strong in the next month or so, according to a Credit Suisse research report on May 6. Malaysia may attract as much as US$3 billion next quarter, a separate note from HSBC said the same day.

The yield on the 3.26 per cent notes due March 2018 fell seven basis points in the last three days to 3.09 per cent today, the lowest for a benchmark five-year bond since September 2011.-- Bloomberg

(Source: Business Times)

Election Boosts Malaysian Market

Malaysia’s shares, bonds and currency rose sharply Monday after the incumbent National Front’s general election victory diminished pre-poll political risk.

The ruling coalition Sunday won 133 of 222 parliamentary seats – compared with 140 in the previous election in 2008 –which is a comfortable enough margin to ensure policy continuity, fund managers and analysts said.

Prime Minister Najib Razak had sought a clear mandate to push through a $444 billion Economic Transformation Program, aimed at making Malaysia a high-income economy by 2020.

“The slimmer majority is in line with market expectation and is taken positively by investors because it means the National Front is still the government and there will be consistency in policies,” said Choo Swee Kee, who manages 700 million ringgit ($230.7 million) as chief investment officer of TA Investment Management Bhd.

The FTSE Bursa Malaysia Kuala Lumpur Composite Index opened 4.5% higher at 1771.62 and reached a record 1826.22; the price of 10-year Malaysian Government Securities rose, pushing the yield down to 3.348%; the U.S. dollar touched a 21-month low of 2.9860 ringgit.

“Malaysia’s [stock] market has underperformed regional markets in Southeast Asia because of concern over political risk; and with the general election now over, the risk premium will diminish,” said Andy Ong, head of research at Affin Investment Bank Bhd. 5185.KU +3.18%

Credit-ratings firms have long warned of Malaysia’s poor fiscal health, pointing to high debt and massive subsidies, which  they say undermine the government’s credit profile.

“Fitch looks forward to greater clarity on the government’s fiscal and economic policy program following Sunday’s elections,” Andrew Colquhoun, head of Asia-Pacific sovereigns at Fitch Ratings, said after the election.

The credit-ratings company had previously noted rising public debt ratios “may eventually exert negative pressure on the ratings,” Mr. Colquhoun said in a statement.

(Source: The Wall Street Journal)