KUALA LUMPUR, Nov 30 — Ringgit credit spreads of corporate bonds are expected to remain tight next year near their current range, “although lifted slightly as spreads rebound from record levels,” AmBank Economic Research said.
“We base our outlook on the following factors — improvements in credit health alongside firm gross domestic product (GDP) growth; continued accommodative monetary policy; and a modest increase in the net issuance of private debt securities (PDS) set for 2024,” it said in a note today.
AmBank said “steadier GDP growth offers expectations of better corporate sector returns and healthier cashflows, thus providing little impetus for repricing of credit risks, while accommodative monetary policy and improvements in financial conditions should support sentiment.”
“As we go into 2024, our anticipation is for net PDS issuances to show a modest increase as GDP grows and capacity in the economy increases via a rise in investments. This will limit the downside to PDS yields in the coming year,” it said.
The research house said monetary policy will remain accommodative and financial conditions should improve, supporting sentiment in the bond market.
“Alongside a moderate inflation outlook and an end to global and domestic monetary tightening, our forecast is for sustained overnight policy rate (OPR) up to end 2024 at 3.0 per cent and anticipation that MGS (Malaysian Government Securities) yields will undergo a modest decline in 2024, which will continue to support sentiment for PDS,” it said.
AmBank expects inflation in 2024 to be within a range of 2.5 to 3.5 per cent, considering the effects of subsidy rationalisation and the impact of the services tax increase.
“Financial conditions are anticipated to loosen, thereby financing costs should decline in 2024.
“Banking sector lending rates, which is now about 5.0 per cent, should consolidate to below that level in 2024 if interbank rates also show impetus to slide slightly in anticipation of OPR cuts post-2024,” it said. — Bernama