Halister News

(Bloomberg) -- ANZ recommends investors in Malaysian bonds to stay overweight cash and turn neutral on duration from underweight following a recent correction in the market, chief economist Sanjay Mathur and strategist Jennifer Kusuma write in note.

• Favors 5- to 7-year segment of curve at current levels
  • Risk- reward for owning MYR has become attractive due to Malaysia’s growth recovery and a stabilization in current-account surplus
  • Supply-demand dynamic would not change materially in 2018
  • Reduced foreign participation would also insulate MYR bonds from global developments near term
• Refrains from further extending duration and looks to buy 10-year notes on dips; upcoming 10-year auctions in November and December may provide better entry levels
• 2018 budget deficit target of 2.8% of GDP translates into net bond supply of 40.8b ringgit and gross supply of 107.6b ringgit
• Still, improvements do not mean Malaysia’s external position is fully out of the woods as short- term external debt cover of 1.2 is lowest in the region
• Ongoing adjustment in Malaysia bond weightings in various global bond indices remains a source of uncertainty

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