Credit Suisse: High foreign shareholding in Malaysian government bonds a crucial concern

by **Cals** Wed 29 Jan 2014, 14:18

Business & Markets 2014

Written by Chong Jin Hun of theedgemalaysia.com

Wednesday, 29 January 2014 12:59

KUALA LUMPUR (Jan 29): The still high level of foreign shareholding in Malaysian government bonds at 45.1% is a crucial concern amid jitters over China's economy and US quantitative easing (QE) reduction, Credit Suisse economists said in a note today.

The economists, Michael Wan, Robert Prior-Wandesforde and Santitarn Sathirathai said the level of foreign shareholding in Malaysian government bonds is still the highest among Asian countries covered by Credit Suisse. The list excludes Japan.

They said this was despite a 4.4% percentage point reduction since May 2013 to the current level of 45.1%.

The quantum of reduction of foreign ownership in Malaysian government bonds at 4.4% is also the highest in the list.

The updated figures for Malaysia compare with the latest foreign shareholding data for Indonesia and Thailand goverment bonds at 32.5% and 17.8% respectively, data compiled by Credit Suisse show.

Foreign ownership of Indian government bonds at 1.7% is the lowest in the list.

"Malaysia, the Philippines and Thailand, which were all hit during last year's mini-crisis, but not as much as India and Indonesia, are also better placed in most categories.

"Nevertheless, we still worry about the high level of foreign bond holdings in Malaysia, the political situation in Thailand and low real interest rates in both Thailand and the Philippines," the economists said.

"The combination of renewed Chinese economic and financial stability concerns, on-going US QE tapering and Argentina's peso devaluation have triggered another wobble in emerging markets.

"No-one yet knows whether this will turn into a financial storm of the sort witnessed in May-September last year, or a short-lived squall. But, as all good boy scouts know, it's best to be prepared," the economists said.