Friday March 23, 2012

M'sian bond market expected to remain volatile throughout the year

Repositioning by investors seen on concern over Greek bond tussle

KUALA LUMPUR: The Malaysian bond market is expected to remain volatile throughout the year due to global economic and political uncertainties, AmInvestment Bank Group chief investment officer of fixed income, fund management division Goh Wee Peng said.

“Bond investors will be repositioning in six to nine months ahead of 2013 as Greece, Spain and Italy bonds remain a lingering concern,” she said at a media briefing yesterday.

Currently, the Greek bond tussle was seeing some relief as there had been enough funding to see it through another year, Goh said, adding that however, it remained uncertain on whether there would be enough funding for the next rollover period.

On the local scenario, Goh said, “It is possible that we may see an increase of five to 10 basis points to the bond yield within this month.

“The next test is the new 20-year Malaysian Government Securities issuance. It's a long-dated issuance and we will see how the demand in the market pans out. It'll be the new 20-year benchmark.”

“We are now on a more trading market rather than buy and hold,” she said, adding that investors should take advantage of the current volatility.

Goh said she expected the March economic data to be better than the previous month.

However, if the data was weaker than previously, there could be a reversal in interest rates, she added.

“We have to remain cautious and continue to keep a lookout on the economic data releases. It depends a lot on the (general) election too,” Goh said.

On the overall market sentiment, Goh said: “We are starting to see a series of moderately positive data coming from the United States. However, there is a new worry of inflation risk in the global context due to concerns of war in Iran.”

She said that there was no clear direction of where the market was heading to due to the general election. “(Maybe) We could see the introduction of more people-friendly policies.”

Goh said she believed that there would be more sovereign downgrades this year, especially in Europe. “This will mean that we might end up with less AAA countries,” she said.

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