KUALA LUMPUR, Dec 5 (Bernama) -- Bursa Malaysia closed lower on Friday amid mixed regional market performance as investors turned cautious over a possible rate hike by the Bank of Japan (BOJ) and upcoming US economic data that may influence the Federal Reserve’s (Fed) interest rate decision next week. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) pared most earlier losses to settle 4.55 points easier, or 0.28 per cent, to 1,616.52 from Thursday’s close of 1,621.07. The benchmark index, which opened 0.37 of-a-point lower at 1,620.70, moved between 1,609.67 and 1,621.25 throughout the day. The broader market was negative, with decliners outpacing advancers 604 to 439. A total of 550 counters were unchanged, 1,151 untraded, and 18 suspended. Turnover declined to 3.17 billion units worth RM2.24 billion from 4.48 billion units worth RM2.75 billion yesterday. Rakuten Trade Sdn Bhd vice-presiden...
Malaysia’s bond and swap markets are flashing potential opportunities for carry trades as investor expectations diverge from economists’ forecasts on Bank Negara Malaysia’s (BNM) policy path.
Market vs. Economist View
Current pricing: Ringgit swaps imply a 50% chance of another rate cut within six months.
Economist consensus: BNM likely to hold rates steady through 2026, following July’s 25bps cut — the first since 2020.
Rationale: Malaysia’s economy remains resilient, cushioned by a final US tariff rate of 19% (vs. threatened 25%)and continued semiconductor investment.
Standard Chartered’s Take
Call: Market expectations for further cuts are “overdone.”
Strategy: Pay two-year ringgit non-deliverable interest rate swaps (NDSRs) — entered at 2.97% (Aug 11), target 3.17%. Current level: 3.015%.
Carry trade setup: Paying two-year swaps while receiving three-month KLIBOR generates positive carry.
Reasoning: As expectations for easing fade, rates should normalise higher, boosting returns.
Auction Signals
Demand cooling at shorter maturities:
Aug 21 2030 bond auction: bid-to-cover 1.87x (2nd-lowest in 2025).
Longer-dated sales (2040 & 2044): stronger demand, cover > 2.73x.
Implication: Short-to-mid maturities are vulnerable if easing bets unwind.
Risks & Reversion Potential
Spread between 3-year MGS and policy rate at ~22bps, 1 standard deviation below 5-year average.
Suggests possible reversion to mean, leaving short-tenor bond rally exposed.
What’s Next
BNM’s next policy meeting: Sept 4.
A hold decision could trigger position unwinds in bonds and swaps, creating volatility but also reinforcing carry opportunities for those positioned on the other side of rate-cut bets.
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