KUALA LUMPUR: Foreign holdings of local bonds increased RM1.5 billion to RM187.3 billion in May, after registering negative foreign flows for the past three months, said Malaysian Rating Corp Bhd (MARC).
The rating firm said foreign demand was largely supported by easing policies introduced by Bank Negara Malaysia during the month.
"Malaysian Government Securities (MGS) accounted for most of the inflows (RM1.9 billion) with foreign holdings of MGS amounting to RM150.5 billion.
"Year to date, the total net foreign outflows has amounted to RM17.4 billion (January to May 2019: RM8.9 billion)," it said.
In its monthly bond market and rating snapshot, MARC said total net foreign outflows from MGS and Government Investment Issues (GII) had declined to RM789.5 billion from RM791.0 billion in April, as gross issuance weakened to RM9.5 billion while the volume of matured papers surged to RM11.0 billion.
Malaysia recorded a net foreign outflow of RM8.9 billion in the first five months of the year.
MARC said demand for MGS and GII at public auctions in May was weaker as well with the one-year average bid-to-cover ratio coming in at 2.5 times.
In the secondary market, MGS yields were anchored down by the prospect of a more pronounced deceleration in economic growth and benign inflation in 2Q2020 for Malaysia.
"Investors expect the economy to moderate even further in the second quarter (Q2) 2020 to reflect the heavier impact from the Movement Control Order (MCO), heightening the pressure for Bank Negara to introduce more easing policies," it said.
MARC also said total outstanding long-term corporate bonds rose to RM708.5 billion in May from RM705.4 billion in April as supply grew and the amount of redeemed papers fell.
"Gross issuance of long-term corporate bonds strengthened to RM7.1 billion supported by heavier issuance from quasi-government as well as both unrated and rated corporate bond issuers.
"The total gross issuance of long-term corporate bonds came in at RM32.2 billion with rated corporate bonds being the largest contributor followed by quasi-government bonds.
"In the secondary market, investment-grade corporate bonds continued to be well supported in tandem with government bonds," it added.