Capital markets news summary for Thu 9 Feb 2023

Capital markets news summary for Thu 9 Feb 2023

BNM shouldn’t raise SRR now

Dr Yeah Kim Leng – a member of the special advisory body advising the Minister of Finance – believes that raising the Statutory Reserve Requirement (SRR) should be delayed given the expected global economic slowdown. Banks are required to maintain Statutory Reserve Accounts (SRA) with Bank Negara Malaysia (BNM) as a measure to manage liquidity. The balance in their respective SRA – which pays no interest – is equivalent to the SRR rate multiplied by their eligible liabilities. The SRR rate was reduced from 3% to 2% on 19 Mar 2020 so that banks have sufficient liquidity to support economic growth. Dr Yeah commented on the 3Q2022 net financing growth of 5.4%, saying that 4%-6% business loans growth is reasonable to avoid an overheating economy. Business outstanding loans grew by 5% while household outstanding loans were up 6.2%. Separately, CGS-CIMB estimated that banks’ core net profit growth would fall from 20.5% to 17.1% if the SRR is raised. The Financial Services Index fell 1.12% to 15,954.56.

Corporate debt grew 34% in 2022

The Malaysian Bond and Sukuk Almanac for 2022 published by Bond Pricing Agency Malaysia (BPAM) shows that the primary issuance of all corporate debt in Malaysia expanded from RM114.28b in 2021 to RM153.05b in 2022. This was contributed by a 143% growth in AAA-rated issuances to RM57.3b. Projek Lebuhraya Usahasama (PLUS) issued RM25.2b in Dec. Other major issuances were Cagamas Bhd with RM20.4b, Maybank Islamic RM16b, DanaInfra RM9.8b, Tenaga Nasional RM6.4b, Sunway RM6.4b and Amanat Lebuhraya Rakyat – which bought Gamuda’s highways – RM5.5b. Total gross issuance for Malaysian Government Securities and Government Investment Issues grew 7.2% from RM160b in 2021 to RM171.5b in 2022, attributed to increases in subsidies and debt service.

Wholesale and retail trade hits record RM137.3b

The Dec 2022 figure was up 13.8% year-on-year. Retail trade had a stellar performance growing 22.7% to RM59.5b. Retail sales in non-specialised stores rose 24.7% to RM22.4b while sales in specialised stores was up 30.7%. Motor vehicle sales rose 24.8%, motor vehicle parts and accessories and maintenance +27.3%, repairs +30.9%, and automotive fuels +44.4%. Sales, maintenance and repair of motorcycles fell 29.8%. Wholesale trade increased by 4.7% to RM60.3b. Wholesale of household goods increased by 7.6% to RM12.3b. Wholesale of agricultural raw materials and live animals gre 18.2% to RM5.5b.

Indonesia approves Genting Oil & Gas West Papua project

The approval is for the revised development plan for the first phase of the gas project in the Kasuri block. This followed changes in production estimates for the Asap, Kido and Merah structures from 1,735b standard cubic feet per day to 2,673.7b. Production from the field will be utilised by a fertiliser plant in Papua and for a liquefied natural gas plant. Genting Oil & Gas signed an initial agreement with state-controlled Pupuk Kaltim – which owns a USD1.5b fertiliser manufacturing plant – to supply 102b British thermal units of gas per day.

Interest rate hikes the biggest economic challenge in the US

JPMorgan’s Jamie Dimon says that the economy remains in good shape but sticky inflation could force the Federal Reserve to raise interest rates above 5% from the current 4.5%-4.75%. Inflation peaked at almost 7% in June 2022 but fell to 5% in Dec, still above the 2% target. He said that if inflation comes down to 3.5%-4% and stays there, the Federal Reserve could send rates higher than 5%. Federal Reserve officials warned of further rate hikes yesterday. Separately, he said that it would be catastrophic for the US to default on its debts. President Joe Biden had urged Republicans – which control the House of Representatives – to raise the USD31.4t debt ceiling.