12 Jul 2013 11:19

KUALA LUMPUR, July 8 (Bernama) -- Malaysian Rating Corp Bhd expects foreign funds to continue supporting the Malaysian Government Securities (MGS) despite the possibility of increasing capital outflows.

The rating agency said as of the first quarter of 2013, foreign investors held about RM138.10 billion worth of MGS, or 47 per cent of total outstanding MGS securities compared to only 17 per cent of total outstanding in 2009.

"The upsurge was largely due to the relatively high yield of the local bonds coupled with the steady prospects of the economy relative to those in advanced countries," it said in its second half 2013 Malaysian bond market outlook issued today.

MARC said foreign funds will continue to provide reasonable support to the local market despite the possibility of increasing capital outflows from this region following the statement by the US Federal Reserve during the third week of June on its intention to scale back bond purchases this year.

"We are still comforted by the fact that there is still an overwhelming demand for new government issuances," it said.

It said the Malaysian MGS and Government Investment issues were forecast at between about RM90 billion and RM95 billion for this year.

"The forecast takes into consideration the government's debt-to-gross domestic product (GDP) ratio of about 53 per cent, which was close to the self-imposed debt ceiling of 55 per cent, and with the assumption that the country's nominal GDP will continue to grow at about eight per cent annually this year," it said. -- BERNAMA