KUALA LUMPUR, June 5 (Bernama) -- Bursa Malaysia closed higher, with the benchmark index rising 0.60 per cent as bargain-hunting persisted following the recent sell-off, despite weaker performances across regional markets. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) gained 10.17 points to 1,693.43 from Thursday's close of 1,683.26. The benchmark index opened 3.19 points higher at 1,686.45 and traded between 1,684.36 and 1,698.53 during the trading session. However, broader market sentiment remained negative, with losers outnumbering gainers 666 to 477. A total of 574 counters were unchanged, 958 untraded and 12 suspended. Turnover fell to 3.41 billion units worth RM3.04 billion from 3.47 billion units worth RM3.58 billion on Thursday.
Hopes that falling borrowing costs would mitigate the US office market downturn have been dashed as financial institutions brace for more commercial real estate (CRE) loan defaults.
Key Highlights:
Financial Institution Actions:
- Deutsche Bank AG: Increased reserves for deteriorating US CRE loans.
- Blackstone Inc.: Its mortgage trust slashed dividends after reporting a quarterly loss of US$61 million, down from a US$101.7 million profit a year earlier.
- New York Community Bancorp: Shares plummeted following a US$390 million provision for loan losses, more than double the average expected by analysts.
CRE Market Distress:
- Over US$94 billion of US commercial real estate is currently distressed, with an additional US$201 billion at risk of becoming distressed, according to MSCI Real Assets.
- A looming US$1.5 trillion wall of loan maturities over the next two years is expected to exacerbate the situation.
Market Outlook:
- John Murray and François Trausch of Pacific Investment Management Co predict further declines in appraised valuations and price indices, making loan extensions increasingly challenging.
- Deutsche Bank anticipates ongoing impacts from the office sector on earnings, with some improvement expected in the second half of the year.
Asset Revaluations:
- Tolu Alamutu, senior credit analyst at Bloomberg Intelligence, noted higher impairments indicate ongoing asset revaluations. Transaction volumes may lead to further adjustments.
- Credit investors remain cautiously optimistic, with risk premiums on bank bonds rising less than the broader market.
Private Credit Opportunities:
- Private credit providers are poised to profit, with CRE debt funds seeking to raise approximately US$50 billion to purchase impaired loan portfolios from banks.
- Katie Keenan, CEO of Blackstone Mortgage Trust, highlighted the company’s strong liquidity and emerging investment pipeline.
Long-Term Impact:
- Murray and Trausch of Pimco warn that even if the Federal Reserve loosens monetary policy, CRE damage will be long-lasting.
- Borrowing costs are expected to keep business property values 20% to 40% below their 2021 peaks.
- The recovery for the commercial real estate market is projected to be slower than after the global financial crisis.
The current financial environment underscores the challenges facing the US office sector, with significant implications for lenders, borrowers, and investors.
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