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Economic Release Details: {RREFKANN Index ECOD}

(Bloomberg) -- Malaysia’s growth and revenue targets unveiled in Friday’s budget are “a tad optimistic” given the lack of clarity of China’s policy impact on commodity prices, says Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore.

• If Malaysia is able to achieve its fiscal consolidation target, it will boost bonds and the ringgit
• It’s an ‘election budget’ and the transient pump-priming based on higher oil price may come across as hollow, says Varathan. Longer-term fiscal consolidation plans may be needed, he adds
• One positive is the diversification of government revenue through implementation of the goods and services tax
• Malaysia Projects 5%-5.5% 2018 GDP Growth, Budget Gap of 2.8%

To contact the reporter on this story: Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Patricia Lui

--STEPHEN TRELOAR

(Bloomberg) -- Malaysia’s efforts at continued fiscal consolidation and diversification of revenues away from energy-related sources are positive for the debt market, says Ray Choy, head treasury strategist at CIMB Bank in Kuala Lumpur.

• While foreign demand for regional bonds has been largely driven by developments in the U.S., medium-term fundamentals for EM Asia markets including Malaysia, are relatively healthier than rest of the EM complex
• “Markets are likely to look past the interim volatility and the dust will settle,” says Choy
• NOTE: Najib Unveils Voter-Friendly Budget Ahead of Election Fight

To contact the reporter on this story: Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Patricia Lui

(Bloomberg) -- Malaysia’s budget is “marginally positive” with expectations for resilient growth, moderation in inflation and continued fiscal discipline, says Winson Phoon, a fixed-income analyst at Maybank Investment Bank in Kuala Lumpur.

• Govt still needs to step up its fiscal consolidation efforts in order to achieve its target of a near-balanced budget by 2020
• “There will be neutral impact on foreign demand for Malaysian government bonds,” says Phoon
• NOTE: Najib Unveils Voter-Friendly Budget Ahead of Election Fight
• NOTE: 10-year yield up 6bps at 4.06%, unchanged from before economic forecasts were announced

To contact the reporter on this story: Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Patricia Lui

--CHAD THOMAS