Malaysia Bond Laggards Show Signs of Recovery: SEAsia Credit

(Bloomberg) -- Malaysian corporate dollar bonds are the worst performers in Southeast Asia this year but are clawing back some ground as economic growth looks set to outpace neighbors.

• The securities have returned about 0.9% this month, cutting their loss for the year to 3.5%. While that’s still worse in 2021 than Thailand, the Philippines and a broad Asian dollar debt index, there are signs that the Malaysian notes could still rebound further
• Hard-currency bond issuance from Malaysian companies is limited and yields are “attractive,” according to Joevin Teo, head of Asian fixed income at Amundi Asset Management in Singapore. The average yield on the securities has risen about half a percentage point this year to 2.7% amid reflationary pressures globally, a Bloomberg Barclays index shows

• Malaysia’s economy will likely expand by about 18.3% this quarter from the year-earlier-period, topping growth by other nations in the region, according to the median forecast of economists surveyed by Bloomberg. For the full-year, economists expect growth of 5.5%, beating Indonesia and Thailand
• The relative performance of Malaysian company dollar bonds will be heavily influenced by the direction of U.S. yields this year, given the smaller average spread cushion on the debt than some peers. That makes returns on the notes, which are some of the highest rated in Southeast Asia, more vulnerable to rising rates

• For Southeast Asian bond pipeline, click here

Islamic Finance - Malaysia’s Sukuk

• Malaysia is considering the sale of a possible dollar-denominated sustainable sukuk, which would mark the first U.S. currency sovereign Sukuk from Southeast Asia this year
• Investors in Malaysia’s government dollar Sukuks have lost 3.3% on average this year, the worst performance globally among such securities, partly because the country has some of the longest such securities in the world. Ones maturing in 2045 and 2046 have gained more than 2 cents this month as longer-dated benchmark yields have retreated

Philippine - Bond Buyback

• Two of the largest listed companies in the Philippines are capitalizing on the selloff in bonds this year to buy back their own debt
  • San Miguel, SM Investments to Redeem Bonds Early
• San Miguel Corp. will redeem the outstanding amount of an $800 million note due in 2023. The bond has been the worst performer among the beer maker’s dollar securities this year, returning 0.9% compared with an average of 4% for all U.S. currency bonds issued by group companies, according to the data compiled by Bloomberg
• SM Investments Corp. will exercise early redemption option on its 3.33 billion peso-denominated securities ($69 million) due 2024 at 102% of principal. The notes have returned 4.36% this year, the best among 4 local-currency callable bonds issued by the company

Indonesia - Tightening Spreads

• After narrowing last week, spreads on Indonesian company dollar notes are now about 49 basis points tighter than a broader Asian index.
• For Indonesia’s credit wrap, click here

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