TheEdge
KUALA LUMPUR: The ringgit declined yesterday on concern that political jitters will cause the central bank to delay raising interest rates amid accelerating inflation.
The currency was trading at 3.2325 against the US dollar as at 5.52 pm, down from 3.2275 the day before, according to data compiled by Bloomberg.
“The prospect for the ringgit may not be so great with the political drawback. The central bank also risks being way behind the curve if it doesn’t raise interest rates this month,” said Joanna Tan, an economist and currency strategist at Forecast Singapore Pte.
Central bank governor, Tan Sri Zeti Akhtar said on July 9 that inflation exceeded 6% last month, something last seen in June 1998. The report on June consumer price changes is due on July 23, and economists are expecting a 6.4% increase from a year earlier, according to Bloomberg survey.
Bank Negara has kept its overnight policy rate unchanged at 3.5% for 17 straight meetings since April 2006, and the next meeting scheduled on July 25 is expected to see a quarter point raise to help curb inflation, Tan said.
The benchmark three-month intervention rate was 11% the last time inflation exceeded 6%, according to Bloomberg.
However, economist Wan Suhaimi Saidi of Kenanga Investment Bank predicted that the central bank would leave the interest rates unchanged at its meeting next week. “The local economy is doing okay, but the political stuff is still going to bug investors,” he said.
Ten-year government bonds rose for the third day, pushing yields to the lowest since the start of the month as traders pared expectations for higher interest rates.
“People mostly aren’t expecting any rate increase next week. That is a small positive for bonds, especially after yields reached a good level this week,” said Mohd Syam Yunus, a bond trader at EON Bank Bhd
The yield on the 4.24% note maturing in Feb 2018 fell two basis points to 4.83%, according to the electronic bond exchange of Bursa Malaysia Bhd. The price rose RM1.50 per RM1000 face value to RM95.50.
Ten-year yields jumped more than 1% since the end of March to reach a two year high of 5.02% on July 14, according to Bloomberg.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
Showing posts with label Bond. Show all posts
Showing posts with label Bond. Show all posts
Tuesday, July 22, 2008
Tuesday, July 15, 2008
Inflation rather than rate hike worries bond market
TheStar
PETALING JAYA: Bond market analysts do not expect Bank Negara to raise interest rates at its July 25 monetary policy meeting and see the lacklustre bond market as affected more by the topical issues of inflation and windfall tax.
At the same time, there is no doubt that falling bond prices and rising yields are spooking bond issuers and fund investors alike.
According to Aseambankers Malaysia Bhd vice-president and head of fixed income research Tan Chee Wee, the bond market continues to be lacklustre since the March 8 general election.
The high yields at present were not attractive to issuers and investors were demanding higher returns, he said.
“We are not expecting a rise in overnight policy rate (OPR, now at 3.5%) on July 25, but consumer price index numbers (an indicator of inflation) from June to December are expected to average at 7% to 8%,” he said.
Higher interest rates would result in higher yields and cheaper bonds but higher inflation would also have the same effect, he said.
The strategy likely being adopted by fixed income funds at present was “going short on duration and to buy when yields go up to a point where they are attractive to the fund,” said Tan.
Going short on duration meant buying bonds with maturities of three years and below, because in the current uncertain environment they would have a lower market risk, he said.
Shorter duration bonds would also see lower losses should interest rates rise, he added.
Meanwhile, a chief economist told StarBiz he was also not expecting a rate rise come July 25.
“Basically, we do not expect Bank Negara to rush into a decision on interest rates,” he said.
The economist said he agreed with Bank Negara that a rise in interest rates had implications of dampening consumption.
“We are looking at the risk of stagflation (in Malaysia). So a rise in interest rates would just be making it worse,” he said.
A hike in interest rates was useful to control inflation in an overheating economy, which was not the case in the present environment, he said.
“I don’t see any possibility of Bank Negara making a rate hike this round,” he said.
On the current lacklustre bond market, he said the bond market was being affected by any number of factors and not solely the windfall tax issue or inflation.
“There is the outflow of funds back to home markets to meet subprime commitments, political news that is increasing the risk premium and the windfall tax on IPPs that is also not favourable,” he said.
Meanwhile, there was market talk that infrastructure bonds had fallen drastically in the past few weeks on concerns of windfall tax on independent power producers (IPPs) that were large bonds issuers.
While the windfall tax issue was indeed causing IPP bonds to fall, Tan believed the bulk of the fall was due to inflation concerns.
An economist at RHB Research Institute agreed that Bank Negara had sent signals that it was unlikely to raise the OPR but rising inflation and pressure on the ringgit from higher rates in the region would likely cause the central bank to raise rates later in the year.
This was necessary not to manage inflation per se but to be “ahead of the curve” so as not have sudden jumps in the interest rate later on, he said.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
PETALING JAYA: Bond market analysts do not expect Bank Negara to raise interest rates at its July 25 monetary policy meeting and see the lacklustre bond market as affected more by the topical issues of inflation and windfall tax.
At the same time, there is no doubt that falling bond prices and rising yields are spooking bond issuers and fund investors alike.
According to Aseambankers Malaysia Bhd vice-president and head of fixed income research Tan Chee Wee, the bond market continues to be lacklustre since the March 8 general election.
The high yields at present were not attractive to issuers and investors were demanding higher returns, he said.
“We are not expecting a rise in overnight policy rate (OPR, now at 3.5%) on July 25, but consumer price index numbers (an indicator of inflation) from June to December are expected to average at 7% to 8%,” he said.
Higher interest rates would result in higher yields and cheaper bonds but higher inflation would also have the same effect, he said.
The strategy likely being adopted by fixed income funds at present was “going short on duration and to buy when yields go up to a point where they are attractive to the fund,” said Tan.
Going short on duration meant buying bonds with maturities of three years and below, because in the current uncertain environment they would have a lower market risk, he said.
Shorter duration bonds would also see lower losses should interest rates rise, he added.
Meanwhile, a chief economist told StarBiz he was also not expecting a rate rise come July 25.
“Basically, we do not expect Bank Negara to rush into a decision on interest rates,” he said.
The economist said he agreed with Bank Negara that a rise in interest rates had implications of dampening consumption.
“We are looking at the risk of stagflation (in Malaysia). So a rise in interest rates would just be making it worse,” he said.
A hike in interest rates was useful to control inflation in an overheating economy, which was not the case in the present environment, he said.
“I don’t see any possibility of Bank Negara making a rate hike this round,” he said.
On the current lacklustre bond market, he said the bond market was being affected by any number of factors and not solely the windfall tax issue or inflation.
“There is the outflow of funds back to home markets to meet subprime commitments, political news that is increasing the risk premium and the windfall tax on IPPs that is also not favourable,” he said.
Meanwhile, there was market talk that infrastructure bonds had fallen drastically in the past few weeks on concerns of windfall tax on independent power producers (IPPs) that were large bonds issuers.
While the windfall tax issue was indeed causing IPP bonds to fall, Tan believed the bulk of the fall was due to inflation concerns.
An economist at RHB Research Institute agreed that Bank Negara had sent signals that it was unlikely to raise the OPR but rising inflation and pressure on the ringgit from higher rates in the region would likely cause the central bank to raise rates later in the year.
This was necessary not to manage inflation per se but to be “ahead of the curve” so as not have sudden jumps in the interest rate later on, he said.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
Wednesday, July 9, 2008
AmInvestment starts RM300m bond fund
BusinessTimes
AMINVESTMENT Bank Goup has started a RM300 million bond fund to invest in government and corporate papers issued in local currencies that will benefit from the world's rising economies from Asia to Latin America.
Amid a slowing global economy, weaker corporate earnings growth and rising inflation, the AmEmerging Markets Bond will provide investors an alternative to the currently volatile stock market.
"Local bond markets appear to offer attractive yields and great additional returns. These can be achieved through further yield compression and also through currency appreciation," managing director T.C. Kok said in Kuala Lumpur yesterday.
At least 95 per cent of the fund will be fed into a bigger fund managed by Investec Asset Management, which manages US$66 billion (RM215.16 billion). The mother fund was started in October last year and has chalked up some US$15 million to US$20 million (RM48.9 million to RM65.2 million) in assets.
As at end-May, 60 per cent of the fund was invested in countries with Single A ratings. These include Russia, Colombia, Indonesia, Qatar, Malaysia and Mexico.
Most of the money was put into government bonds, which proves suitable in today's environment as they are shielded from the subprime crisis, AmInvestment's director of retail funds Ng Sze How said.
Investec's director for regional business development KK Cheung estimated an annual return of 8 to 10 per cent for the fund, which adopts an active strategy to pick the best countries and shorting the worst.
Cheung said the fund will gain from the structural improvement in the emerging economies, which may boost the country's rating and in turn push up prices of the papers.
The fund may benefit from the potentially stronger Asian currencies against the US dollar. A higher bond yield, which goes in tandem with the rising inflation, will also benefit the fund, Cheung said.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
AMINVESTMENT Bank Goup has started a RM300 million bond fund to invest in government and corporate papers issued in local currencies that will benefit from the world's rising economies from Asia to Latin America.
Amid a slowing global economy, weaker corporate earnings growth and rising inflation, the AmEmerging Markets Bond will provide investors an alternative to the currently volatile stock market.
"Local bond markets appear to offer attractive yields and great additional returns. These can be achieved through further yield compression and also through currency appreciation," managing director T.C. Kok said in Kuala Lumpur yesterday.
At least 95 per cent of the fund will be fed into a bigger fund managed by Investec Asset Management, which manages US$66 billion (RM215.16 billion). The mother fund was started in October last year and has chalked up some US$15 million to US$20 million (RM48.9 million to RM65.2 million) in assets.
As at end-May, 60 per cent of the fund was invested in countries with Single A ratings. These include Russia, Colombia, Indonesia, Qatar, Malaysia and Mexico.
Most of the money was put into government bonds, which proves suitable in today's environment as they are shielded from the subprime crisis, AmInvestment's director of retail funds Ng Sze How said.
Investec's director for regional business development KK Cheung estimated an annual return of 8 to 10 per cent for the fund, which adopts an active strategy to pick the best countries and shorting the worst.
Cheung said the fund will gain from the structural improvement in the emerging economies, which may boost the country's rating and in turn push up prices of the papers.
The fund may benefit from the potentially stronger Asian currencies against the US dollar. A higher bond yield, which goes in tandem with the rising inflation, will also benefit the fund, Cheung said.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
Tuesday, July 8, 2008
Local bond market to remain volatile
TheEdge
KUALA LUMPUR: The local bond market, which has been sluggish for the past one month, is likely to continue seeing volatility in the next few months, according to Bondweb Malaysia Sdn Bhd chief operating officer Meor Amri Meor Ayob.
From a long-term perspective, however, the bond market’s outlook remained bright as economic slowdown was merely “part of the cycle,” he noted.
“For the secondary market, there will still be a lot of uncertainties until the (equity) market settles down. Inflation is a global issue. Every bond market in the world is facing the same issue.
“With the possibility of interest rates being hiked, bond market will definitely turn into a bear market but it is not doom and gloom. It is a normal behaviour around the world,” he told The Edge Financial Daily.
Usually, when equity markets collapse, bond markets will rise. But with increasing global inflationary pressure, the move to curb inflation by raising interest rates will make bonds cheaper with higher yields.
Meor Amri said the volatility of bond prices for the past few weeks was largely due to bearish sentiment among the investors.
“Malaysian bond market is made up of professionals; retail participation is almost zero. If the professionals stay out, liquidity tends to disappear and thus, the yields and the prices fluctuate. By nature of the market, this kind of volatility is predictable and should not be unexpected,” he added.
Bondweb is the country’s first and only bond pricing agency regulated by the Securities Commission. It provides an extensive range of evaluated prices of Malaysia bonds on a daily basis.
Bondweb’s market development head Mohd Shaharul Zain said the last time Malaysian bond market saw a collapse was in 2002 where bond prices sank and yields skyrocketed.
It is not inflation but interest rates that would directly affect the bond prices. This means bond yields will be intact if interest rates do not jump. Bank Negara governor Tan Sri Zeti Akhtar Aziz reportedly said Malaysia’s inflation could have hit 6% to 7% in June. The country’s May inflation stood at a 22-month high of 3.8%.
Meanwhile, Meor Amri said global Islamic bond market continued to see “explosive” growth, as investors in the Middle East were eagerly looking for syariah-compliant bonds.
“With the current price of oil, about US$10 trillion (RM33 trillion) of oil money will flow into that region in the next three years. They need to put the money somewhere and syariah-compliant bonds are what they are looking for,” he said.
Malaysian bond market is among the largest in the world as a proportion of gross domestic product. Ringgit-denominated Islamic bonds account for two-thirds of the global Islamic bonds outstanding in 2007.
In view of the robust demand for Islamic bonds, Bondweb and Thomson Reuters — the world’s leading source of intelligent information for business — had last Friday signed a global data distribution agreement, whereby Bondweb’s daily evaluated prices of about 2,000 unlisted Malaysian bonds will be available across Thomson Reuters’ products.
Meor Amri said Bondweb was leveraging on Thomson Reuters’ global network to have its data delivered to all major financial markets as fast as possible.
Meanwhile, Thomson Reuters Malaysia managing director Simon Soo Hu said Bondweb’s data would complement its existing bond pricing services that was benefiting more than 200,000 financial professionals worldwide.
In particular, he said the partnership would help promote Malaysian Islamic bonds to investors in the Middle East, who previously might not have the access to Malaysian bond prices.
“At Thomson Reuters, we are very focused on Islamic contents. Globally, we are trying to have as much sukuk contents as possible,” he said.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
KUALA LUMPUR: The local bond market, which has been sluggish for the past one month, is likely to continue seeing volatility in the next few months, according to Bondweb Malaysia Sdn Bhd chief operating officer Meor Amri Meor Ayob.
From a long-term perspective, however, the bond market’s outlook remained bright as economic slowdown was merely “part of the cycle,” he noted.
“For the secondary market, there will still be a lot of uncertainties until the (equity) market settles down. Inflation is a global issue. Every bond market in the world is facing the same issue.
“With the possibility of interest rates being hiked, bond market will definitely turn into a bear market but it is not doom and gloom. It is a normal behaviour around the world,” he told The Edge Financial Daily.
Usually, when equity markets collapse, bond markets will rise. But with increasing global inflationary pressure, the move to curb inflation by raising interest rates will make bonds cheaper with higher yields.
Meor Amri said the volatility of bond prices for the past few weeks was largely due to bearish sentiment among the investors.
“Malaysian bond market is made up of professionals; retail participation is almost zero. If the professionals stay out, liquidity tends to disappear and thus, the yields and the prices fluctuate. By nature of the market, this kind of volatility is predictable and should not be unexpected,” he added.
Bondweb is the country’s first and only bond pricing agency regulated by the Securities Commission. It provides an extensive range of evaluated prices of Malaysia bonds on a daily basis.
Bondweb’s market development head Mohd Shaharul Zain said the last time Malaysian bond market saw a collapse was in 2002 where bond prices sank and yields skyrocketed.
It is not inflation but interest rates that would directly affect the bond prices. This means bond yields will be intact if interest rates do not jump. Bank Negara governor Tan Sri Zeti Akhtar Aziz reportedly said Malaysia’s inflation could have hit 6% to 7% in June. The country’s May inflation stood at a 22-month high of 3.8%.
Meanwhile, Meor Amri said global Islamic bond market continued to see “explosive” growth, as investors in the Middle East were eagerly looking for syariah-compliant bonds.
“With the current price of oil, about US$10 trillion (RM33 trillion) of oil money will flow into that region in the next three years. They need to put the money somewhere and syariah-compliant bonds are what they are looking for,” he said.
Malaysian bond market is among the largest in the world as a proportion of gross domestic product. Ringgit-denominated Islamic bonds account for two-thirds of the global Islamic bonds outstanding in 2007.
In view of the robust demand for Islamic bonds, Bondweb and Thomson Reuters — the world’s leading source of intelligent information for business — had last Friday signed a global data distribution agreement, whereby Bondweb’s daily evaluated prices of about 2,000 unlisted Malaysian bonds will be available across Thomson Reuters’ products.
Meor Amri said Bondweb was leveraging on Thomson Reuters’ global network to have its data delivered to all major financial markets as fast as possible.
Meanwhile, Thomson Reuters Malaysia managing director Simon Soo Hu said Bondweb’s data would complement its existing bond pricing services that was benefiting more than 200,000 financial professionals worldwide.
In particular, he said the partnership would help promote Malaysian Islamic bonds to investors in the Middle East, who previously might not have the access to Malaysian bond prices.
“At Thomson Reuters, we are very focused on Islamic contents. Globally, we are trying to have as much sukuk contents as possible,” he said.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
Wednesday, April 16, 2008
Bondholders wary of inflation, political uncertainties
TheEdge
KUALA LUMPUR: Malaysian bonds are expected see a price slide as yields grind upwards this year, exacerbated by the country’s political uncertainties and rising inflation globally.
Bond analysts said like the country’s equity market, Malaysian bonds’ attractiveness had diminished after Barisan Nasional lost five states to the Opposition at the recent general elections, causing uncertainties in the country’s political landscape.
“Bondholders are holding back as they are waiting for clarity in the country’s political scene, especially on the party leadership of Umno,” an analyst told The Edge Financial Daily yesterday.
He, however, did not expect the Malaysian government to arrive at a solution to appease bondholders’ jitters in the immediate term, as Umno had decided to have its annual general meeting to elect its party leaders only in December.
The bond market jitters were exacerbated by rising inflation in the region, as countries continued to battle higher prices of food including rice, wheat and milk.
An analyst said: “Fixed income holders hate inflation, and although Malaysia’s inflation rate is still under control, we do not know when rising food prices, which contribute to higher inflation rates, will recede.”
“Although the government had reiterated that it would not raise oil prices at the moment, consumers are most likely to suffer from a transparent price hike in oil as well as in food,” he said.
Additionally, he said both three-year and five-year government bonds were currently trading below the overnight policy rate (OPR) of 3.5%, but the situation would not be sustainable if Bank Negara Malaysia does not reduce the OPR.
However, bondholders would be more concerned with the rising inflation than the OPR, the analyst said, adding that another concern that bondholders raised were the sudden influx of Korean and Indian issuers into the country’s bond market causing a widening of credit spread.
The trend of foreign issuers raising funds in the Malaysian market had become apparent since the first issue by Middle Eastern multilateral institution Gulf Investment Corporation (GIC), which was rated AAA+ by Ratings Agency Malaysia Bhd and were oversubscribed by 2.76 times in mid-January.
The Edge Financial Daily had earlier reported that more foreign issuers were raising debt papers here, as it was cheaper to do so, but local industry players were concerned that these issuers’ entry would pose more difficulty for local issuers to issue papers cheaply.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
KUALA LUMPUR: Malaysian bonds are expected see a price slide as yields grind upwards this year, exacerbated by the country’s political uncertainties and rising inflation globally.
Bond analysts said like the country’s equity market, Malaysian bonds’ attractiveness had diminished after Barisan Nasional lost five states to the Opposition at the recent general elections, causing uncertainties in the country’s political landscape.
“Bondholders are holding back as they are waiting for clarity in the country’s political scene, especially on the party leadership of Umno,” an analyst told The Edge Financial Daily yesterday.
He, however, did not expect the Malaysian government to arrive at a solution to appease bondholders’ jitters in the immediate term, as Umno had decided to have its annual general meeting to elect its party leaders only in December.
The bond market jitters were exacerbated by rising inflation in the region, as countries continued to battle higher prices of food including rice, wheat and milk.
An analyst said: “Fixed income holders hate inflation, and although Malaysia’s inflation rate is still under control, we do not know when rising food prices, which contribute to higher inflation rates, will recede.”
“Although the government had reiterated that it would not raise oil prices at the moment, consumers are most likely to suffer from a transparent price hike in oil as well as in food,” he said.
Additionally, he said both three-year and five-year government bonds were currently trading below the overnight policy rate (OPR) of 3.5%, but the situation would not be sustainable if Bank Negara Malaysia does not reduce the OPR.
However, bondholders would be more concerned with the rising inflation than the OPR, the analyst said, adding that another concern that bondholders raised were the sudden influx of Korean and Indian issuers into the country’s bond market causing a widening of credit spread.
The trend of foreign issuers raising funds in the Malaysian market had become apparent since the first issue by Middle Eastern multilateral institution Gulf Investment Corporation (GIC), which was rated AAA+ by Ratings Agency Malaysia Bhd and were oversubscribed by 2.76 times in mid-January.
The Edge Financial Daily had earlier reported that more foreign issuers were raising debt papers here, as it was cheaper to do so, but local industry players were concerned that these issuers’ entry would pose more difficulty for local issuers to issue papers cheaply.
Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.
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