KUALA LUMPUR, June 25 ― Malaysia’s local currency bond market expanded 2.9 per cent quarter-on-quarter (q-o-q) in the first quarter of 2020 (Q1 2020) to RM1.5 trillion as both the government and corporate bonds segments grew amidst Covid-19, Asian Development Bank (ADB) said.

In its latest issue of Asia Bond Monitor report released today, ADB said total outstanding sukuk, or Islamic bonds, increased 3.1 per cent q-o-q to RM966.7 billion as at end-March 2020.

“Government bonds outstanding accounted for 52.6 per cent of Malaysia’s overall local currency bonds, reaching US$186 billion (RM795.9 billion).

“This is 3.9 per cent higher from the previous quarter and 4.9 per cent larger than the same period in 2019,” it said.


ADB said corporate bonds accounted for 47.4 per cent of Malaysia’s total bond stock, reaching US$167.6 billion in Q1 2020.

Meanwhile, it said the Covid-19 pandemic continue to drag local currency bond markets in emerging East Asia, comprising China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam, as investment sentiment globally and in the region wane and containment measures limit economic activity.

“Credit spreads have widened for nearly all markets in the region as investors took a risk-averse approach, with the share of foreign holdings in most of emerging East Asia’s local currency bond markets also declining,” it said.


It said local currency bonds outstanding in emerging East Asia totalled US$16.3 trillion at end-March, up 4.2 per cent from December 2019 and 14 per cent higher than in March 2019.

“Bond issuance in the region reached US$1.7 trillion in Q1 2020, up 19.7 per cent from Q4 2019,” it said.

ADB said emerging East Asia’s local currency bonds outstanding as a share of gross domestic product rose to 87.8 per cent at end-March 2020.

“Government bonds outstanding rose to US$9.9 trillion at end-March, while corporate bonds reached US$6.4 trillion,” it said.

It said China remained the largest bond market in emerging East Asia at US$12.5 trillion, accounting for 76.6 per cent of the total bond stock at the end of Q1 2020.

ADB said risks to the global outlook remained heavily tilted to the downside, mainly due to the uncertainty brought about by the pandemic, including the prospect of longer periods of minimal economic activity and further waves of outbreaks.

It said other risk factors included trade tensions between China and the United States, as well as financial volatility due to capital outflows from emerging markets.

Chief economist Yasuyuki Sawada said governments and central banks in the region had taken significant measures to mitigate the impact of Covid-19 through fiscal stimulus packages and ease monetary policies.

“But more needs to be done to strengthen the region’s economies and financial markets,” he added. ― Bernama