KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
Malaysia is set to moderate its government bond issuance in 2H 2025, a move that aligns with fiscal discipline efforts and could support bond prices in the coming months. For fixed-income investors, this shift may signal a potential entry point, particularly in long-duration bonds, amid growing expectations of a rate cut cycle.
Bond Issuance Slows as Government Targets Fiscal Consolidation
The Malaysian government is expected to issue between RM64 billion and RM90 billion worth of MGS and GII in the second half of 2025 — a slowdown from RM91 billion in 1H. This reflects the administration’s push to achieve its reduced fiscal deficit target of 3.8% of GDP, down from 4.3% in 2024.
2025 Budget: Development spending allocation set at RM85 billion
Issuance cap: MGS and GII are only used to finance development expenditure
“We expect supply pressure to ease considerably,” said Kenanga Investment’s Wan Suhaimie.
Demand Remains Strong — Especially from Foreign Investors
Investor appetite remains robust:
Foreign holdings hit a record RM282.4 billion in May (22.5% of total government bonds)
Bid-to-cover ratios near 3x, showing strong demand at recent auctions
Malaysia’s institutional base, including EPF and pension funds, provides a solid absorption buffer. Any additional offshore demand would further tighten yields.
“Malaysia is a high-savings economy with deep local demand,” noted RAM Ratings' Woon Khai Jhek.
Market Watch: Monetary Policy in Focus
All eyes are now on Bank Negara Malaysia's (BNM) policy decision due July 9:
11 of 23 economists (Bloomberg) expect a 25bps rate cut
A potential easing cycle could begin after a pause since May 2023
Implications for Bonds:
Rate cuts tend to boost bond prices, especially on the long end of the yield curve
Traders remain cautious due to inflation uncertainties, but the bias is toward lower yields
“Yields may drift lower, with long-duration bonds likely benefiting more,” said RAM’s Woon.
Investment Takeaway
With reduced bond supply, strong local and foreign demand, and a potential monetary easing cycle, Malaysia’s fixed-income market is set for favorable risk-reward dynamics in 2H 2025.
Strategic Consideration:
Extend duration cautiously if expecting rate cuts
Diversify across MGS and GII to benefit from policy support
Monitor upcoming fiscal announcements and BNM guidance
💡 Investors seeking stability and income in a lower-yield global environment may find Malaysian bonds increasingly attractive over the next 6–12 months.
Comments
Post a Comment