KUALA LUMPUR, Nov 5 (Bernama) -- Bursa Malaysia closed higher, buoyed by Bank Negara Malaysia’s (BNM) decision to maintain the Overnight Policy Rate (OPR) at 2.75 per cent, alongside positive cues from Wall Street. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 19.30 points, or 1.19 per cent, to 1,635.86 from Wednesday’s close of 1,616.56. The benchmark index opened 6.72 points higher at 1,623.28, and fluctuated between an intraday high of 1,642.44 and a low of 1,622.62 during the trading session. However, market breadth was negative, with losers outnumbering gainers 723 to 497, while 466 counters were unchanged, 1,075 untraded and 10 suspended. Turnover rose to 3.74 billion units valued at RM3.61 billion compared with yesterday’s 2.81 billion units valued at RM2.57 billion.
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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