FW: Bond Market Watch: Malaysia - Undeterred by Kitchen-Sinking Exercise

 

Bond Market Watch: Malaysia - Undeterred by Kitchen-Sinking Exercise

Malaysia: Undeterred by Kitchen-Sinking Exercise

Mildly Bullish. Local sentiment was weighed down by a confluence of policy transition under the new administration and headline news that Malaysia’s government debt has exceeded MYR1t, but sentiment should improve with policy clarity and budget reset. Fiscal and bond supply risk is unlikely to be significant, although more details is needed for MYR201.4b lease payment obligations under PPP, for now we assume these have been budgeted for under operating expenditure. Reiterate our buy call on 15y MGS 11/33, Enter: 4.60%, Target: 4.35%, Stop: 4.85%.

China: Short-term Rates Rise on Prefunding Activity

Neutral. The official tone of the PBOC’s monetary policy stance will likely stay neutral and prudent, but additional targeted easing via RRR cuts should not be ruled out in 2H2018. On one hand for stability consideration, liquidity will likely be kept ample to avoid unnecessary stress in the market, but on the other hand for prudent consideration, reverse repo and SLF rates may continue to be increased marginally by 5-10bps potentially in 2H2018. We think the balance of risks is fairly neutral for now and CGB yields should stay in range.

Indonesia: BI Strives to Get “Ahead of the Curve”

Neutral. Raising interest rate by another 25bp, totaling 50bps in May, at the unscheduled meeting manage to stabilize the Rupiah and alleviate outflow pressure. IndoGB market may consolidate in the near term, perhaps moving sideways in a less volatile range. Indonesian market will be closed for about 10 days from 10th to 20th June for Eid Al Fitr festival, therefore secondary trade volume will likely thin out and bid-ask probably widen nearing mid-June.

Singapore: Neutral on Stable Funding Rates and Geopolitical Risks

Neutral. SGS should continue to track the UST performance, a strong correlation that has expectedly been revived since early Jan 2018. Looking ahead, the widely anticipated 25bps FFR hike by the US Fed in June, which is ~90% priced in by market, should give little upward pressure on yields unless the Fed’s forward guidance on rates become ostensibly hawkish, but this may be unlikely given the recent headline risks on geopolitical tensions such as the uncertainty surrounding the politics in Italy. We retain a neutral view on SGS.

Thailand: Raised to Neutral after the Recent Correction

Raised to Neutral. Following a 15-30bps correction in ThaiGB yields in May, we think risk-reward has turned more balanced. The negative yield differential between 10y ThaiGB and 10y UST yields is close to the narrower end YTD. Diverging monetary policy path between the US Fed and BoT may stay in the near term. Thai Baht should stay resilient on a still stable political landscape and the country continues to benefit from large current account surplus.

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Bond Market Watch: Malaysia - Undeterred by Kitchen-Sinking Exercise


Regards,

Winson Phoon, ACA
(65) 6231 5831
winsonphoon@maybank-ke.com.sg
 
Se Tho Mun Yi
(603) 2074 7606
munyi.st@maybank-ib.com

Anup Kumar
(62) 21 2922 8888 Ext 29692
akumar@maybank.co.id

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FW: MARC AFFIRMS INDONESIA'S SOVEREIGN RATING AT AA-

 

 

 

P R E S S  A N N O U N C E M E N T

                       

                                                                                                FOR IMMEDIATE RELEASE

 

MARC AFFIRMS INDONESIA’S SOVEREIGN RATING AT AA-

 

MARC has affirmed Indonesia’s foreign currency sovereign rating of AA- with a stable outlook based on its national rating scale. The rating reflects MARC’s opinion of the sovereign’s ability to meet its foreign currency obligations in full and on time. The government of Indonesia has no debt rated by MARC.

 

Economic resilience continues to be the biggest rating support. In 2017, economic growth performance improved on the back of higher domestic demand. Indonesia’s large population, a growing middle class and rapid urbanisation continue to fuel domestic demand. There was also growth support from the recovery in commodity prices, as well as the surge in gross fixed capital investment, which expanded 6.2% from 4.5% previously. Improving global trade, which saw exports growing 9.1%, also helped. Meanwhile, the pace of inflation remains benign due in part to structural shifts that have helped shore up Indonesia’s monetary policy credibility. Over the medium term, economic growth will likely come in the 5.0%-5.5% range.

 

Another rating support is Indonesia’s historically prudent and conservative fiscal and debt management policies. With the focus on keeping aggregate fiscal discipline, the momentum of the rise of fiscal deficit has moderated and stabilised, though it remains close to the legal deficit ceiling of 3.0% of gross domestic product (GDP). Meanwhile, government debt stood at a moderate 29.0% of GDP in 2017, well below the 60% legal threshold. Indonesia’s government debt dynamics are deemed robust to both standard shocks and stress tests. Over the medium term, government debt will likely increase modestly to around 30% of GDP on the back of infrastructure development spending.

 

Indonesia’s dependence on external financing, which keeps it vulnerable to external risk factors, is a rating concern. This is amply illustrated by its net international investment position of -33.5% of GDP as of end-2017. With the fiscal and corporate sectors heavily dependent on non-resident financing, a shock coming from a sudden large reversal of capital inflows triggered by, for example, global financial volatility or rising geopolitical concerns, could be amplified with significant ramifications for economic, fiscal and financial sector stability. Notwithstanding these concerns, it should be noted that its external position remains sustainable and improving fundamentals have helped increase its ability to weather external storms thus far.

 

Indonesia’s narrow tax base is another rating concern. Less than 10% of the population, approximately 15% of the total number of employed workers, are obligated to file annual income tax returns. While the percentage of registered employed workers (as a share of total employed) has continued to rise, the percentage of those obligated to file tax returns has trended downwards. On top of that, tax buoyancy has continued to weaken. In 2017, Indonesia's GDP growth accelerated by 5.1%, while domestic tax revenue realisation grew only 4.3%, about half of what the authorities had expected. It reflects in part weak tax compliance and the tax authorities' declining capability to tap Indonesia’s tax potential.

 

Governance and institutional issues continue to be rating constraints in Indonesia. For example, among other things, the effectiveness of tax efforts can be affected by factors such as corruption and voice and accountability. Indonesia currently ranks lowly (2018: 114) in terms of ease of paying taxes in the World Bank’s Doing Business report. Not surprisingly, Indonesia’s tax-to-GDP ratio is about four to five percentage points lower than its ‘potential’ due to low tax compliance. In terms of ease of doing business, corruption is also a major impediment. In 2017, the country was ranked at number 96 in Transparency International’s Corruption Perceptions Index report.

 

Indonesia’s stable outlook reflects MARC’s view that the island archipelago's sovereign credit profile will remain resilient in the face of downside risks that include escalation in geopolitical conflicts, a potential US-China trade war, a potential hard landing of its major trading partner China, as well as tighter global financial conditions. We assume the government remains committed to its reform efforts amidst a gradually improving global economy and commodity market. 

 

Contacts: Quah Boon Huat, +603-2717 2931/ boonhuat@marc.com.my; Nor Zahidi Alias, +603-2717 2936/ zahidi@marc.com.my.

 

May 31, 2018

 

[This announcement is available in the MARC corporate homepage at http://www.marc.com.my]

 

 

----   DISCLAIMER    ----

This communication is provided by Malaysian Rating Corporation Berhad (MARC) on the basis of information believed by MARC to be accurate and reliable as derived from publicly available sources or provided by the rated entity or its agents. MARC, however, has not independently verified such information and makes no representation as to the accuracy or completeness of such information. Any assignment of a credit rating by MARC is solely to be construed as a statement of its opinion and not a statement of fact. A credit rating is not a recommendation to buy, sell, or hold any security.

 

 

© 2018 Malaysian Rating Corporation Berhad

 

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FW: Islamic Finance News Alert

 

 

Islamic Finance news Alert 

Islamic Finance news Alert

Thursday, 31st May 2018   S&P 500 Shariah Dow Jones Islamic World FTSE Shariah All World Russell - IdealRatings Islamic Global 2,415.42 3,715.84 2,417.41 2,485.49 ▲ +28.49 (1.19%) ▲ +31.76 (0.86%) ▲ +19.65 (0.82%) ▼ −20.69 (0.83%)   HIGHLIGHTS: Dana Gas's BOD approves new Sukuk plan – Tehran University rolls out Iran's first academic venture capital fund – MARC places all ratings of toll-related Sukuk under watch     Reprieve for Thailand's only Islamic bank as the hunt for new partners continues Daily Cover THAILAND: The Thai government is about to give the Kingdom's sole Islamic bank a new lease of life in an attempt to save the ailing bank, established to meet the financial needs of Thailand's second-largest religious group. Lawmakers have formally agreed to revise the Islamic Bank of Thailand (IBank) Act, allowing the finance ministry to raise its stake in the state-owned bank above its previous 49% threshold, paving the way for a THB2 billion (US$62.22 million) injection by the government. The capital investment is pending the announcement of the law revision in the Royal Gazette, according to the Bangkok Post. Currently holding a 48.5% stake, the ministry could raise its shareholding to 99%. A year ago, the Thai cabinet gave the greenlight to IBank to increase its capital by THB18 billion (US$559.97 million): THB2 billion would be provided by the government budget and the remainder by the Specialized Financial Institutions Development Fund. The capital injection would help improve the bank's negative capital adequacy ratio. IBank, which has failed to turn a profit in half a decade, was put on a rehabilitation course two years ago to control the worrying high levels of toxic assets on its balance sheet and to lift the bank out from the red. It is expected that the bank would finally buck its negative earnings trend this year. A key part of the strategy, apart from offloading THB50 billion (US$1.56 billion)-worth of non-performing financing to Islamic Bank Asset Management Co, an entity set up to facilitate IBank's recovery, is to onboard new partners who will bring fresh investment and resources to turn around the bank – a task the Shariah bank has yet to succeed at. Multiple negotiations, including with foreign entities, have fallen through the cracks, including most recently, with three interested parties as the pricing cannot be agreed upon; it has been rumored that one of the richest men in Thailand, lawyer-turned-investor Wichai Thongtang, is one of the few interested in IBank. IBank recently reconstituted its board of directors; come the 1st September, Acting President and Acting Manager Pornlert Lothanan will replace Chaiwat Utaiwan as the board chairman.       Case Study VMMEA's debut Sukuk: The return of pre-IPO paper The issuance of exchangeable Sukuk ahead of an IPO is perhaps uncommon in the global Islamic finance industry. Earlier in May, the market for this type of Sukuk was boosted by the Middle East unit of an international conglomerate. Speaking to Dentons, the legal advisor to Virgin Mobile Middle East and Africa (VMMEA)'s pre-IPO exchangeable Islamic paper, DURGAHYENI MOHGANA SELVAM brings you an exclusive account of the deal.     India: A Correspondent Report Shariah compliant REITs in India – an opportunity Real estate is a lucrative sector for investors especially in a developing economy like India and the last decade has been lucky for investors. But investment in real estate in the past three years has been marred by lots of uncertainties as the sector grapples with the effect of demonetization and the GST regime.       Saudi Arabia: A Correspondent Report Dealing with distressed private real estate funds in Saudi Arabia Investors in Saudi Arabian private real estate investment funds, most of which are Shariah compliant and established pursuant to the rules and regulations of the Saudi Arabian Capital Market Authority (CMA), at times are challenged by adverse market conditions which render the completion of such funds' investment objectives a considerable challenge. In such situations, unitholders are finding themselves locked up in funds managed by fund managers who are quite often unable to liquidate the fund and recover unitholders' contributions in a timely manner.       Today's IFN Alerts IRAN: Khuzestan Cement to issue one-year Sukuk Salam worth IRR500 billion (US$11.83 million) UAE: Dana Gas's board of directors approves refinancing its existing Sukuk; agrees on issuing new Sukuk INDONESIA: Indonesia privately places new Sukuk series; reopens auction for six series KUWAIT: Central Bank of Kuwait issues KWD360 million (US$1.19 billion)-worth of conventional bonds and Tawarruq facilities BANGLADESH: Bangladesh Bank issues BDT2.49 billion (US$29.24 million) six-month Bangladesh Government Islami Investment Bond GAMBIA: Mixed response to Central Bank of Gambia's three Sukuk Salam facilities MALAYSIA: Bank Negara Malaysia sells Government Investment Issue Murabahah IRAN: Tehran University launches first academic venture capital fund BRUNEI: Royal Brunei Airlines secures Islamic and conventional financing facilities for eight aircraft SAUDI ARABIA: Derayah REIT secures SAR600 million (US$159.91 million) Islamic financing facility from Riyadh Bank GLOBAL: General Council for Islamic Banks and Financial Institutions submits comments on the IFSB's revised standard on disclosures IRAN: Securities and Exchange Organization of Iran introduces new regulations on disclosure of information MALAYSIA: MARC places all issue ratings for toll concessionaires under MARCWatch Developing due to heightened near-term uncertainty GLOBAL: HSBC rolls out facial-recognition technology for mobile banking services SAUDI ARABIA: Board director of Saudi British Bank and chief of SABB Takaful's audit committee step down MALAYSIA: BIMB Holdings records 11.1% increase in profit before Zakat and tax for the first quarter of 2018 SAUDI ARABIA: National Commercial Bank appoints Faisal Omar Al-Saqqaf as new CEO SAUDI ARABIA: Bupa Arabia for Cooperative Insurance appoints Sulaiman Nasser Al-Hitlan Al-Qahtani as independent member of audit committee     GLOBAL: Dr Kamola Bayram is the new IFN correspondent for education sector GLOBAL: IFN welcomes M Wail Aminou as new correspondent for the SRI, ethical and green sector KAZAKHSTAN: Shaimerden Chikanayev joins IFN as correspondent for Kazakhstan GLOBAL: Sohail Zubairi to author IFN's new 'Back to Basics' section ALGERIA: IFN welcomes Dr Ahmed Tahiri Jouti as new correspondent for Algeria   UK Islamic Finance Week 2018 5th September 2018 (London) IFN Turkey Forum 2018 10th September 2018 (Istanbul) IFN Indonesia Forum 2018 1st October 2018 (Jakarta) IFN Africa Forum 2018 October 2018 (Africa) IFN Americas Forum 2018 11th October 2018 (New York) IFN South Africa Forum 2018 23rd October 2018 (Cape Town) IFN Kuwait Forum 2018 5th November 2018 (Kuwait City) IFN Saudi Arabia Forum 2018 7th November 2018 (Riyadh) IFN Investors Forum 2018 26th November 2018 (Kuala Lumpur)   TREASURY MANAGEMENT FOR ISLAMIC BANKS: Documentation, Assurance, Risk & Strategic Management 18th July 2018 (Kuala Lumpur) Islamic Trade Finance Open Seminar 18th July 2018 (Kuala Lumpur) Islamic Trade Finance Open Seminar 1st August 2018 (Dubai) COMPREHENSIVE BALANCE SHEET STRESS TESTING: Hands-on Masterclass with MS-Excel & R 24th & 26th September 2018 (Kuala Lumpur) IFRS9 & ITS IMPACT ON CREDIT RISK MODELLING: from compliance to competitive advantage 27th September 2018 (Kuala Lumpur) Structuring, Valuation, Risk and Accounting for Sukuk 5th & 6th November 2018 (Riyadh) Sukuk Restructuring 8th & 9th November 2018 (Kuala Lumpur)

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FW: [Maybank] BI Hikes Rate With More Hikes Possible

 

 

BI Hikes Rate With More Hikes Possible Global Markets Daily by Saktiandi Supaat FX Research The new BI governor did not disappoint and followed through with his hawkish rhetoric with a 25bp hike to its benchmark policy rate to 4.75%. He highlighted that this move was pre-emptive ahead of the Fed's expected tightening in Jun. While further adjustments will be data-dependent, the governor warned that the Bi will continue to "calibrate developments, domestic and global, to make use of available space for higher rates in a measured way". This suggests that while BI remains open to ... Saktiandi Supaat     (65) 6320 1379     saktiandi@maybank.com.sg Leslie Tang     (65) 6320 1378     leslietang@maybank.com.sg Disclaimer This message is intended only for the use of the person to whom it is expressly addressed and may contain information that is confidential and legally privileged. If you are not the intended recipient, you are hereby notified that any use, reliance on, reference to, review, disclosure or copying of the message and the information it contains for any purpose is prohibited. If you have received this message in error, please notify the sender by return e-mail immediately and delete all its contents. If you wish to read Disclaimer in details, please click HERE. To unsubscribe or change preference settings, please click here to contact your representative.

FW: RHB | Singapore | April M3 Bounces Back

 

 

 

 

Economic Research			31 May 2018
Singapore
Economic Update
April M3 Bounces Back   u Singapore’s M3, including Asian currency units, bounced back to grow 5.3% YoY in April (March: +3.1%). The stronger growth of public and private credit was not enough to offset the slower growth in net foreign position; u Bank lending growth eased slightly to 8.7% YoY in April, but remained healthy – it is near its strongest pace in >3 years;  u Going forward, we maintain our expectations for M3 to accelerate to +6.2% in 2018 from 4.1% in 2017, premised on a strong SGD, stable economic prospects, and pick-up in property transactions.   Economist: Vincent Loo Yeong Hong   | +603 9280 2172
To access our recent reports please click on the links below: 28 May: Stronger April IPI Growth, In Line With Exports  24 May: GDP Above Initial Estimate 23 May: April’s Inflation Still Soft 17 May: NODX Rebounds In April On Pharma Exports 30 Apr: M3 Eases In March, Loans Stay On Upward Trend 26 Apr: IPI: Stellar Semicon Growth But Weakness Persists
Economics Team
Arup Raha	Group Chief Economist	arup.raha@rhbgroup.com		+65 6232 3896
Peck Boon Soon	Chief ASEAN Economist	bspeck@rhbgroup.com		+603 9280 2163
Vincent Loo Yeong Hong	Malaysia, Singapore	vincent.loo@rhgroup.com		+603 9280 2172
Ahmad Nazmi Idrus	Indonesia	ahmad.nazmi.idrus@rhbgroup.com		+603 9280 2179
Aris Nazman Maslan	Thailand, Philippines , Vietnam	mohd.aris.nazman@rhbgroup.com		+603 9280 2184