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The Star
20-05-2025
- Business
- The Star
Foreign inflows into Malaysian bonds surge to RM10.2bil in April
KUALA LUMPUR: Foreign net buying of Malaysian bonds surged to RM10.2 billion in April 2025 from RM3.2 billion in March, driven by strong demand for Malaysian Government Securities (MGS) and Government Investment Issues (GII), said RAM Rating Services Bhd (RAM Ratings). In a statement today, RAM Ratings said MGS and GII attracted RM9.7 billion of inflows in April, up from RM3.0 billion in the preceding month. Additionally, the increase in April was supported by Malaysian Treasury Bills (MTB) and Malaysian Islamic Treasury Bills (MITB), which recorded RM480 million in inflows -- a reversal of the RM252 million outflows in the previous month. "The surge in April marks the second consecutive month of net inflows, despite "Liberation Day' tariffs announced on April 2, 2025,' it said. According to RAM Ratings, the Liberation Day tariffs sparked a sharp increase in market turmoil, with the volatility index published by the Chicago Board Options Exchange - often called the "Fear Index' - rising to a high not seen since the start of the COVID-19 pandemic. "Heightened risk aversion contributed to a weakening of the ringgit against the US dollar in the first week of April, as the local currency swiftly depreciated to 4.50 against the greenback as at April 9 from 4.43 as of end-March. "The 10-year US Treasury (UST) yield soared to a high 4.48 per cent as at April 11 from 4.23 per cent as of end-March. Market jitters, however, soon subsided amid signs of easing US-China trade tensions. The ringgit rose to 4.32 against the US dollar as of end-April while the 10-year UST yield retreated to 4.17 per cent,' it added. RAM Ratings said that adding to yield volatility, Moody's Ratings downgraded the US sovereign credit rating to Aa1 from Aaa on May 16, citing structural fiscal concerns and the unsustainable trajectory of US debt -- this contributed to renewed weakness in US treasuries, triggering another round of repricing of US government debt. "The 10-year UST yield jumped to 4.46 per cent as at May 19 from 4.17 per cent as of end-April, as markets digest the downgrade alongside concerns of reduced foreign appetite for US debt. "The selloff pressure was relatively contained within the US as MGS yields largely trended sideways, with the benchmark 10-year MGS yield sitting at 3.64 per cent as at May 19 from 3.68 per cent as of end-April,' it said. - Bernama
The Star
12-05-2025
- Business
- The Star
Low impact on M'sia's credit rating
PETALING JAYA: Despite the imposition of US tariffs, Malaysia's fiscal consolidation initiatives will not be fully derailed and negatively affect its sovereign credit rating. Economists said that the imposition of US tariffs could see some slowdown in the country's economic growth for 2025, but this would not significantly affect the government's fiscal consolidation exercise. Fiscal consolidation refers to government policies aimed at reducing deficits and debt accumulation. It involves measures to balance government revenue with expenditure, minimising deficits, controlling public debt and promoting sustainable economic growth. A sovereign credit rating is a score assigned by a credit rating agency to a country, reflecting its ability and willingness to repay its debt obligations. It's an assessment of a nation's creditworthiness. Malaysia's sovereign credit rating is currently A3 with a stable outlook by Moody's. Fitch Ratings also affirmed Malaysia's sovereign rating at BBB+ with a stable outlook, while S&P Global Ratings affirmed Malaysia at A- with a stable outlook. MARC Ratings has affirmed Malaysia's sovereign rating at AAA with a stable outlook. Bloomberg recently reported Moody's Investors Service as citing that the US tariff shocks, among others, could pose a major threat to Malaysia's sovereign credit rating due to the potential disruption to economic growth and fiscal consolidation. The ratings firm sees downside risks to its initial projection of 5% growth for Malaysia this year due to exposure to global trade tensions. There's also a possibility that the government increases spending to counter headwinds from US-imposed levies, said Christian De Guzman, senior vice-president at Moody's in an interview with the wire agency. De Guzman also noted that Malaysia may delay or postpone the petrol subsidy re-targeting, referring to the government's plans to end blanket subsidies for its most popular gasoline by mid-year. 'The risks to fiscal consolidation are there,' he said. On April 2, the US government launched baseline tariffs of 10% on all imports to the United States and reciprocal tariffs on trade partners on April 9. Malaysia was levied with a 24% reciprocal tariff. Shortly after that, the United States announced it would impose a 10% tariff for 90 days on more than 75 countries that were willing to negotiate with the United States. Negotiations during the tariff pause would decide whether tariffs on Malaysia would be lifted, maintained at 24% or reduced. RAM Rating Services Bhd economist Nadia Mazlan RAM Rating Services Bhd economist Nadia Mazlan said the various stimulus measures introduced by the government to help soften the blow to Malaysia's economic growth from the US tariffs would unlikely fully derail the country's fiscal consolidation initiatives and fiscal discipline. This is because narrowing the fiscal deficit is seen to remain a priority for the government in the medium term, she noted. 'The government will likely continue to adjust its future spending to work towards achieving the 3% fiscal deficit target by end-2028,' she said. Nadia said the government has introduced stimulus measures for the domestic economy and will likely implement more in the event US tariffs severely pressure economic activity. To counter the impact thus far, she said the government has announced that it would provide RM1.5bil worth of new guarantees and financing for affected small and medium enterprises as well as to fund efforts to diversify exports through the Malaysia External Trade Development Corp. Other fiscal measures such as cash transfers may be next on the list if risks to economic growth rise and would likely be targeted towards vulnerable sectors and groups, she noted. 'The additional spending from these fiscal stimuli could mean that the government will exceed its budgeted expenditure amount this year, which may result in a small setback in Malaysia's fiscal consolidation trajectory. 'We do not discount the possibility that the government may allow the fiscal deficit to be slightly off-target this year (Budget 2025 target: 3.8% of gross domestic product (GDP); 2024: 4.1% of GDP), in order to fund the extra stimulus needed to counter the negative impact from US tariffs. 'Additionally, slower economic growth reduces nominal GDP, which represents the denominator of the ratio, making it harder to lower the fiscal deficit ratio,' Nadia said. MARC Ratings Bhd chief economist Ray Choy MARC Ratings Bhd chief economist Ray Choy said fiscal consolidation efforts remain in progress, though not without its challenges. One critical factor shaping the pace of reform is the phased development of an integrated beneficiary database, essential for executing subsidy re-targeting with precision and social legitimacy. 'While the timeline has shifted, the delay may be viewed constructively as a reflection of the government's intention to safeguard household welfare amid a deteriorating global economic outlook. 'This measured approach underscores a pragmatic balancing of fiscal rectitude and political economy constraints,' he noted. He said furthermore, Malaysia's fiscal and macroeconomic policy would need to adjust to a more subdued external environment. Of particular relevance is the calibration of fuel subsidy retargeting, he said. Slower than anticipated growth, alongside a sharper than expected decline in global oil prices, with Brent now trading below US$65 per barrel, alters the policy calculus. 'While lower oil prices ease the fiscal burden of maintaining subsidies, they also dampen petroleum-related revenues, introducing competing pressures. 'Still, the current environment offers a window of flexibility: Reduced subsidy expenditure creates space to implement reforms more gradually, cushioning the impact on households. 'At the same time, the revenue constraint could serve as a constructive impetus for the government to accelerate consideration of alternative fiscal measures and move toward a broader, more resilient revenue base. 'In short, trade-induced volatility may delay subsidy rationalisation at the margin but also reinforces the imperative of longer-term fiscal consolidation,' Choy said. Juwai IQI global chief economist Shan Saeed Unperturbed by Moody's caution that the US tariff shocks, among others, could pose a major threat to Malaysia's sovereign credit and fiscal consolidation, Juwai IQI global chief economist Shan Saeed said the government has the economic tools to maintain macroeconomic stability. 'The Malaysian government can still use the amalgamation of fiscal and monetary policies to keep the economic growth trajectory moving at the macro level. 'Malaysia can still manoeuvre strategically within the trade and commerce landscape and can handle the tariff pressure by diversifying into other regions of the global economy. 'It depends on the government decision after analysing the key variables in the global economy like tariff talks outcomes, revenue stream in the current fiscal year, geopolitical risk, inflation numbers, interest rates outlook and regional financial markets,' he said. Furthermore, he said the government could focus on expanding the GDP size of the country, increase aggregate demand and most importantly, provide confidence to local investors. 'Once the GDP improves, it will enhance the revenue base, and the government will be able to collect more revenues. We expect GDP to still meander around 5 to 6% in the current fiscal year and the ringgit to hover between RM4.10 and RM4.30 against the US dollar,' Shan said. OCBC Senior Asean economist Lavanya Venkateswaran On whether the Malaysian government may increase spending to counter headwinds from US-imposed levies and the risk to fiscal consolidation initiative, OCBC Senior Asean economist Lavanya Venkateswaran said it does make sense to adopt counter-cyclical monetary and fiscal policies to support economic growth, particularly if the reciprocal tariff is implemented. More targeted fiscal spending to support impacted business and tax relief measures could be introduced, she said. 'The challenge for the moment is that uncertainties remain elevated. It is not clear whether the United States is ready to make deals with Asian trading partners that can lead to materially lower tariffs. 'This context sets the stage for officials to be more prepared and stand ready to adopt counter-cyclical policies,' she said. She said the government's fiscal policies have been moving in the right direction. Lavanya said this round of global volatility comes as fiscal consolidation was gaining traction but could justifiably be delayed. It would, however, be important for the government to remain prudent with fiscal support, sticking to targeted measures and moving ahead with measures to broaden the revenue base, albeit keeping in mind the shock to growth, she said. Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid As to the issue of government spending due to US tariffs and the risk of fiscal consolidation, Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said there is always a chance that it could happen. In the past, he said the government would make some alterations to the budget in order to account for the new development, especially when there are impending economic shocks on the horizon. 'So, the government has to be pragmatic and such pragmatism can be a positive factor for confidence building,' he said. Asked whether the pressure from tariffs could delay some of the government's revenue boosting measures like delaying of petrol subsidy etc, he said: ' The issues involved have to be clearly identified. This will dictate how the policy responses can be crafted effectively and efficiently. 'The tariff shocks would affect the exporters and therefore, the assistance should be focused on them. They might need some tax breaks or grants and microfinancing that will help them navigate the challenges. 'The point here is, the assistance has to be targeted. On petrol subsidy rationalisation, if the system is already in place and has been tested and the results are robust, I suppose it can be rolled out. So we need to be very clear on the issue,' he noted. Centre for Market Education CEOCarmelo Ferlito Centre for Market Education CEO Carmelo Ferlito views the effects of government spending as mostly negative. 'Government spending is the main source of inflation and its so-called 'stimulus' impact is only temporary, creating unsustainable situations in the mid to long term. 'It would be better to move in the direction of a more friendly fiscal system, with ad hoc solutions linked to external trade and work without pause for radical free trade agreements,' he said. Furthermore, he said the government's announcement of the delay in subsidy rationalisation due to the US tariffs is not a good move. He said this is because tariffs are fought with more free trade agreements, not by delaying reforms which are key for the structural renascence of the country, Ferlito said. Commenting on the measures the government should undertake to ensure fiscal consolidation with a strong revenue base and less debts, he said: 'The key is always cutting spending. Without a clear plan of rationalisation of the public sector, including the apparatus of government-linked companies, any fiscal reform will be limited in its impact. 'In terms of the revenue side, I advocate for lower income tax and reintroducing goods and services tax plus better enforcement. We should renounce burdensome initiatives such as e-invoicing. But, again, without a clear plan of cutting spending, fiscal consolidation is impossible,' he said.
The Star
09-05-2025
- Business
- The Star
Bank Rakyat issues RM1bil senior sukuk wakalah
KUALA LUMPUR: Bank Rakyat has successfully issued a RM1 billion Islamic medium-term notes (IMTN) sukuk wakalah via special purpose vehicle (SPV) Imtiaz Sukuk II Bhd. The issuance was made through the book-building process on April 24, 2025 under the senior sukuk wakalah programme of up to RM10 billion, which has been assigned a rating of AA2 by RAM Rating Services Bhd. Bank Rakyat said in a statement that the issuance was made in two tranches, comprising RM120 million for a five-year tranche and RM880 million for a seven-year tranche. "The bank also managed to garner a respectable demand for its senior sukuk wakalah with a final bid-to-cover ratio of 1.98 times the final issue size,' it added. The proceeds from the senior sukuk wakalah issued will be utilised for shariah-compliant purposes, which include working capital requirements, capital expenditure, general investments, providing financing and other general corporate purposes. Bank Muamalat Malaysia Bhd, CIMB Investment Bank Bhd, Maybank Investment Bank Bhd and RHB Investment Bank Bhd have been appointed as the joint lead managers for the sukuk wakalah programme. - Bernama
New Straits Times
09-05-2025
- Business
- New Straits Times
Bank Rakyat issues RM1bil sukuk via SPV
KUALA LUMPUR: Bank Rakyat has issued RM1 billion Islamic medium-term notes via special purpose vehicle (SPV) Imtiaz Sukuk II Bhd. The issuance was made through the book-building process on April 24 under the senior sukuk wakalah programme of up to RM10 billion, which has been assigned a rating of AA2 by RAM Rating Services Bhd. Bank Rakyat said in a statement that it is made in two tranches comprising RM120 million for a five-year tranche and RM880 million for a seven-year tranche. The bank garnered a respectable demand for its senior sukuk wakalah with a final bid-to-cover ratio of 1.98 times the final issue size. The proceeds from the senior sukuk wakalah will be used for Syariah-compliant purposes. This includes working capital requirements, capital expenditure, general investments, providing financing and other general corporate purposes. Bank Muamalat Malaysia Bhd, CIMB Investment Bank Bhd, Maybank Investment Bank Bhd and RHB Investment Bank Bhd have been appointed as the joint lead managers for the sukuk wakalah.
The Star
05-05-2025
- Business
- The Star
Domestic demand steadies growth
PETALING JAYA: Malaysia's economic growth for the first quarter ended March 31, 2025 (1Q25), is expected to be in line with the recently released advance gross domestic product (GDP) estimate of 4.4%. Most economists whom StarBiz spoke to had GDP projections that aligned with the advance estimate, noting that domestic demand likely anchored growth in 1Q25 amid trade tensions and uncertainties. Bank Negara is set to release the preliminary 1Q25 GDP data on May 16, which is expected to show a moderation in growth from 5% in 4Q24. The government's growth projection of 4.5% to 5.5% for the year may be revised given the recent developments. MARC Ratings Bhd chief economist Ray Choy MARC Ratings Bhd chief economist Ray Choy expects GDP growth to be in the region of 4.5%. He said the main drag would come from the mining and quarrying sector, caused by a decline in oil and gas revenues and a high base effect from 1Q24. However, Choy said consumer demand would likely remain supportive of growth, mainly due to the increase in civil servants' salaries, the rise in minimum wages and stable employment conditions. He noted that demand from wholesale and retail trade during the festive season in 1Q25 is expected to help drive growth. 'Growth in the construction sector and the electrical and electronics sector was likely healthy in the said quarter due to ongoing transport infrastructure upgrades and various urban renewal projects, alongside healthy demand for semiconductors,' he said. Choy has projected an annual GDP growth of 4.4% this year, cautioning that domestic demand may slow due to external uncertainties stemming from US tariffs and the effects of the trade war on global demand. 'Financial market volatility will also affect consumer sentiment and cause some wealth destruction. 'However, domestic demand growth will likely remain above 5%, premised on increases in civil servants' salaries, higher minimum wages and stable employment conditions. 'Typically, consumer demand growth does not fluctuate drastically compared to other sectors, such as manufacturing investments and construction,' he added. RAM Rating Services Bhd senior economist and head of economic research Woon Khai Jhek RAM Rating Services Bhd senior economist Woon Khai Jhek said the GDP deceleration for 1Q25 was within the rating agency's expectations. 'One of the key factors for the deceleration was the mining sector. 'This is to be expected amid a natural gas production facility shutdown in Sarawak in 1Q25, which resulted in a 6% contraction in the Industrial Production Index (IPI) for the mining sector during the January to February 2025 period. 'Hence, the sharp 4.9% contraction in mining output, as indicated by the advance estimates for 1Q25 (4Q24: 0.9%), (and) its drag on overall GDP growth comes as no surprise,' he said. Woon said the anticipated slowdown in the services sector also dragged overall growth lower. The advance estimates put services growth at 5.2% in 1Q25, easing from 5.5% in 4Q24. 'We had expected it in anticipation of a continued moderation in wholesale and retail trade activities, which averaged 3.9% in January to February 2025 (4Q24: 4.4%). 'There was also some anticipated drag from electricity generation, as the IPI for electricity contracted by 1.5% in January-February 2025 (4Q24: 3.1%),' he said. Drilling down further on domestic demand, Woon said public and private investments are expected to drive growth through the continued rollout of multi-year infrastructure projects and greater realisation of approved investments. These factors are expected to provide the necessary support and buoy Malaysia's overall GDP growth this year, he added, noting that the rating agency has revised its annual GDP forecast to between 3.5% and 4.5%, down from 4% to 5%. He said much of the year's outlook depends on tariff negotiations, counterbalance measures and regional trade initiatives that could materialise in the near to medium term. Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the 1Q25 advance estimate growth was within the bank's expectations for a moderate start to the year. He said despite the boost from the festive seasons of Chinese New Year and Hari Raya Aidilfitri, the headline number was somewhat underwhelming. 'Looking ahead, while domestic demand is expected to remain the main growth driver, we anticipate some moderation in 2025. 'We have downgraded our GDP growth forecast to 4.1% for this year, reflecting a softer-than-expected start to the year and increasing downside risks from the external front, including heightened geopolitical tensions and the recent escalation in US tariff measures, which could weigh on exports and investor sentiment. 'Private consumption will likely grow at a more measured pace, while investment will continue to lend support, particularly in infrastructure and manufacturing sectors. 'Overall, we expect domestic demand to grow slightly below its long-term trend, underscoring the need for continued policy support and strategic investments to sustain growth amid a challenging global backdrop,' Mohd Afzanizam said. Sunway University economics prof Yeah Kim Leng Sunway University economics professor Dr Yeah Kim Leng has projected domestic demand growth to be the main anchor of growth for the year, with a forecast range of 4.7% to 5.2% – slower than the 5.3% growth achieved in 2024. Private consumption and investment will be the main drivers of domestic demand in the face of highly uncertain and softening external demand, he said. Yeah pointed to the advance 1Q25 GDP data, which showed that retail trade has held up well, expanding 5.4% in the first two months of the year. 'Internally, the overriding imperative for policymakers is to shield the country from the economic turbulence caused by the ongoing US tariff threats, while continuing to strengthen the competitive foundations of the economy. 'These include expediting investments, diversifying trade, and continuing the reform agenda to improve government administrative efficiency and strengthen the national education and health systems, while engaging with the private sector to raise wages, skills and productivity levels,' Yeah noted. OCBC Senior Asean economist Lavanya Venkateswaran OCBC Bank senior Asean economist Lavanya Venkateswaran said resilient private consumption and a continued focus on infrastructure spending helped support economic growth for Q125. 'We forecast 2025 GDP growth of 4.3% year-on-year (y-o-y) with the risks skewed to the downside. 'The challenges for the Malaysian economy will be the headwinds mainly from the external front, which will likely have a knock-on impact on domestic demand,' she said. HSBC economist Yun Liu HSBC Asean economist Yun Liu said Malaysia's 1Q25 advance GDP growth of 4.4% y-o-y was a small surprise, as it was below the bank's original forecast of 4.9% y-o-y. Trade headwinds are likely to intensify despite the 90-day pause on the Liberation Day tariffs announced April 2. She said besides trade, foreign direct investments would also be affected due to the unprecedented uncertainty, making investors more cautious and adopt a 'wait-and-see' approach. 'That said, there are still green shoots. For one, the trade negotiations are underway as we wait for more clarity on the direction of tariffs after 90 days. 'In addition, Malaysia's trade is also diversified by products and trading partners,' she said. Liu said on a relative basis, Malaysia compares well for domestic resilience relative to its peers, with decent private consumption and public investments expanding at a strong pace. This means the domestic resilience can partially mitigate some external risks. 'We have lowered our 2025 GDP growth (forecast) to 4.2% (from 4.8%) for Malaysia, and we believe this may prompt more policymakers' responses. 'We are now penciling in a 25 basis points rate cut from Bank Negara in July,' Liu said.
