‘Malaysian bond market highly developed, largest in Asean’

PETALING JAYA: Malaysia’s bond market is highly developed and is the largest in Asean, boasting a size of some US$433 billion (RM2 trillion).

The market size of US$433 billion covers corporate and government bonds. according to first-quarter 2023 (Q1’23) data from the Asian Development Bank, said MARC Ratings Bhd chief economist Dr Ray Choy.

“Indonesia and Thailand hold second and third spots with US$407 billion and US$398 billion, respectively,” he told SunBiz.

Notably, Malaysia not only takes the lead in market size but also excels in bond turnover ratio and trading volume.

“Malaysia ranks among the top three in terms of bond turnover ratio and trading volume, alongside Indonesia and Singapore,” he noted.

Choy said that while Indonesia and Singapore have a higher intensity of trading activity than Malaysia, this does not reflect a structural advantage over Malaysia.

“Firstly, Indonesia’s and Singapore’s markets are dominated by government bonds with a minor share in corporate bonds, which skews the trading turnover ratio higher, but narrows participation from the broader economy,” he said.

Choy highlighted the robustness and distinctiveness of Malaysia’s corporate bond market, attributing its resilience to the corporate sector’s preference for stability over rapid turnover.

To illustrate, in Indonesia, 44% of corporate bonds boast maturities exceeding three years, but Malaysia stands out with an impressive figure of 81%. The contrast underscores the Malaysian bond market’s aptitude for facilitating longer-term issues.

“Malaysia’s market structure has better breadth with substantial depth, since it channels funding to longer term corporate projects with greater variety in maturities and credit quality, facilitating a more effective corporate bond market than its Asean peers,” Choy said.

Emir Research head of social, law and human rights Jason Loh Seong Wei said China’s shift away from US debt should drive attention towards Malaysia’s bond market.

“With China offloading its US Treasury bond holdings – which fell to a 12-year low in 2022 below the US$1 trillion mark for the first time – we should be promoting and positioning our bond market (both public and corporate) which is the most developed in the region and highly liquid – to the country. This will bolster investment confidence and climate in Malaysia in relation to China,” Loh told SunBiz.

According to Bank Negara Malaysia, the Malaysian bond market is one of the largest and most developed in the region. “Malaysian bonds are stable, liquid and offer attractive real yields for both conventional and Islamic investors,” it stated.

The central bank acts as banker and adviser to the government and assists in planning and facilitating issuances through market infrastructure that it owns and operates.

The government relies on a range of debt instruments to manage its finances.

They include Malaysian Government Securities, which are long-term loans for development, and Malaysian Government Investment Issues, similar loans based on Islamic principles.

For short-term needs, there are Malaysian Treasury bills and Malaysian Islamic Treasury bills, which help cover immediate expenses.

Beyond government needs, local businesses also use the bond market to raise funds by issuing bonds, medium-term notes and commercial papers.

MARC Ratings Bhd chief economist Dr Ray Choy.

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