BIMB Securities Research: Net foreign inflows in March

Transcription

1. BIMB Securities Research A Member of BIMB Holdings Group Monthly Update 10 April , 2018 Net foreign inflows in March  Foreign holdings of MYR debts securities increased to RM210.1bn  Foreigners bought RM2.8bn of MGS and GII in February  Total portfolio inflow of RM2.74bn for equities and debt securities combined  Steady OPR at 3.25% provides further support for bonds Malaysian debt securities saw net foreign buying activities in March. Foreign holdings of MYR debt securities increased by RM2.8bn to RM210.1bn in March, equivalent to 15.6%. Malaysia Economy Foreign holdings of both MGS and GII increased by RM0.4bn in March to RM165.9bn (Jan: RM165.5bn) and RM18.8bn (Jan: RM18.4bn) respectively. In percentage wise, foreign ownership of MGS increased to 45.6% (Feb: 45.4%; Jan: 45.7%; Dec’17: 45.1%; Nov: 44.3%) while holdings of GII remained at 6.7% (Feb: 6.7%; Jan: 6.9%; Dec: 6.9%; Nov: 6.7%). Although there was an inflow of RM0.8bn to RM184.7bn in foreign ownership of government debt (MGS + GII), percentage wise, total foreign holding in government debt decreased slightly to 28.6% from 28.7% in February due to an increased in total outstanding (Mar: RM645.7bn; Feb: RM640.8bn). Meanwhile, foreign holdings of discount instruments increased by RM2.4bn to RM9.4bn while foreign holdings of PDS declined by RM0.4bn to RM15.9bn. In combined amounts (inclusive of short-term bills/notes and corporate bonds/sukuk), foreign holding levels in March 2018 were higher by RM2.8bn, bringing total foreign ownership of MYR bonds to RM210.1bn or 15.6%. As at end-March, there were RM2.8bn inflows (Feb: -RM3.9bn; Jan: +RM4.4bn) from total debt securities while the equity market, saw relatively marginal foreign fund outflows of RM0.06bn in March (Feb: -RM1.1bn; Jan: +3.4bn) as a stronger ringgit provided buffer against global volatility. This means a total portfolio inflow of RM2.74bn for equities and debt securities combined (Feb: -RM5.0bn; Jan: +7.8bn). Table 1: Foreign Holdings of Malaysia Total Debt Securities Monthly Flows (RM’bn) Foreign Holdings (%) Mar’18 Feb’18 Mar’18 Feb’18 Mar’18 Feb’18 MGS 165.9 165.5 0.4 -3.1 45.6 45.4 GII 18.8 18.4 0.4 -0.5 6.7 6.7 PDS^ 15.9 16.3 -0.4 0.7 - - Others* 9.4 7.0 2.4 -1.0 - - 210.1 207.2 2.8 -3.9 15.6 15.7 Total Source: Bank Negara Malaysia, BIMB Securities ^ Private sector conventional and sukuk *Includes BNM notes and treasury bills (conventional and Islamic) PP16795/03/2013(031743) Economics Foreign Holdings (RM’bn) Imran Nurginias Ibrahim imran@bimbsec.com.my (603) 2613 1733 |1
2. BIMB Securities Research Fixed Income Chart 1 : Foreign holdings of Malaysia debt securities 1600 30.0 Total Outstanding (LHS) Foreign Holdings (LHS) % of Foreign Holdings (RHS) 1400 25.0 1200 20.0 RM'million 1000 800 15.0 600 10.0 400 5.0 200 0 Jan'09 Aug 0.0 Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan'16 Aug Mar Oct Source: Bank Negara Malaysia, BIMB Securities Chart 2: Foreign holdings of MGS 400 55.0 50.0 350 RM'billion 45.0 300 40.0 250 35.0 30.0 200 25.0 150 20.0 100 15.0 10.0 50 5.0 0 0.0 Jan'10 Jul Jan'11 Jul Jan'12 Jul Jan'13 Jul Jan'14 Jul Jan'15 Jul Jan'16 Jul Jan'17 Jul Jan'18 Foreign Holdings of MGS (LHS) MGS Outstanding (LHS) % of Foreign Holdings (RHS) Source: Bank Negara Malaysia, BIMB Securities www.bisonline.com.my | Page 2
3. BIMB Securities Research Fixed Income Table 2 : Spread against US 10-year treasury (%) 10-yr government bond (end-Mar) Spread vs. US 10-yr treasury (end-Mar) 10-yr government bond (end-Feb) US 2.739 - 2.861 UK 1.350 -139 1.501 -136 Germany 0.497 -224 0.656 -220 Japan 0.049 -269 0.053 -281 China 3.751 101 3.845 98 Malaysia 3.946 121 4.041 118 Indonesia 6.675 394 6.632 377 Thailand 2.395 -34 2.383 -48 Singapore 2.294 -44 2.392 -47 Country Spread vs. US 10-yr treasury (end-Feb) Source: Bloomberg, BIMB Securities At the March 2018 FOMC meeting, the Fed raised rates by 25bps to 1.50%-1.75% and hiked up forecast for GDP but mainly maintained its inflation target for 2018-2019. Policymakers opined that rise in the labor market and inflation warranted the latest hike but the statement and forecasts lean towards a more controlled or a less hawkish view. As per the projections, 2018 GDP was hiked to median forecast of 2.7% from 2.5% at the December 2017 FOMC. However, FOMC members were unchanged on price outlook, maintaining their median forecast for PCE inflation at 1.9% - same as at December FOMC. The Fed signalled that inflation should move higher in ‘coming months’ but also hinted inflation would stabilize near the 2.0% target in the medium term horizon. The dot-plot projections lean just slightly heavier towards 2.25% for 2018 but mainly go into range 2.75%-3.25% for 2019. This equates to three hikes in 2019 and this is a slightly steeper trajectory for 2019 versus previous forecasts. Chart 3: MGS curves % 5 4.8 4.6 4.4 4.2 4 3.8 3.6 3.4 3.2 3 3 5 7 31-Jan-18 www.bisonline.com.my 10 15 28-Feb-18 20 30 30-Mar-18 Year Source: Bank Negara Malaysia, BIMB Securities | Page 3
4. BIMB Securities Research Fixed Income The local 10-year MGS bond yield fell marginally in March , averaging at 3.95%. Nonetheless, rising local interest rates has widened the yield gap between the US Treasury 10-year yield and the local 10-year MGS bond yield, elevating the yield gap at a favorable level of 120 basis points as at the week ending 30th March 2018. Hence, we do not expect significant risk from the looming trade war and Fed rate hike to local fund flows. Steady OPR at 3.25% provides further support for bonds Trade war, tech-sell off and White House’s personal woes dominated the headlines in March 2018. Though it is not really clear what’s going on but we believe it is not over yet and expect more to come from Trump as he is trying hard to fulfil his promises. Volatility remained high in March on concerns over increased interest rates rest of the year, but MYR bonds rose as US Treasuries rallied amid trade conflict fears between the US and China, and solid ringgit. The swing in stocks was mainly influenced by external factors and less to do with local factors. Bank Negara Malaysia kept rates steady at 3.25% at the March MPC. The central bank sounded positive on domestic factors but raised caution on possible financial market swings and prospects of trade friction. The central bank toned down a tad its hawkish view from the statement released back in January. On balance, we still expect OPR to remain unchanged at 3.25% for the rest of 2018 unless global conditions improve or domestic price conditions improve. February CPI print came surprisingly low at 1.4%, in contrast to January’s 2.7%, dragged by lower fuel in prices. While inflation stays soft and Bank Negara will not rush for another hike this year, we see gains in MYR bonds particularly alongside recovery in UST. The appreciation bias of the ringgit appears intact given still weak USD backdrop and the recent downward shift in USDMYR pair. Aside, Fed stance appears to be less hawkish in March FOMC, may pressure USD further which could trigger renewed foreign inflows and provide a lift to MYR bonds in medium term. www.bisonline.com.my | Page 4
5. BIMB Securities Research Fixed Income DEFINITION OF RATINGS BIMB Securities uses the following rating system : STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months. TRADING BUY Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain. HOLD Share price may fall within the range of +/- 10% over the next 12 months TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels. TRADING SELL Share price may fall by more than 15% in the next 3 months. SELL Share price may fall by more than 10% over the next 12 months. NOT RATED Stock is not within regular research coverage. SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analyst’s coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analyst’s coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analyst’s coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB Securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this date and are subject to change without notice. BIMB Securities Sdn Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report. Printed and published by BIMB SECURITIES SB (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2613 1600 Fax: 03-2613 1799 http://www.bimbsec.com.my www.bisonline.com.my Azharuddin Nordin Head of Research | Page 5