bonds have remained resilient year to date as they outperformed global peers as well as when compared to global equities, ending up in positive territory while other indices tumbled on rising yields and global inflationary pressure.
Despite outflow from global investors, domestic investors splash with liquidity especially those fixed depositors looking for higher yields than the current low deposit rates. The domestic bond market is flooded with inflow from local players.Although Malaysia’s inflation has declined from a month ago, we do not expect Bank Negara Malaysia to suddenly make a 180% turnaround.
We think that Malaysia bonds are oversold as the economy now is in much better shape than it was during the GFC. Current gross domestic product growth stood at 8.9% year-on-year compared with 6.6% in the same quarter of 2008 which showed that economic activity is robust with low risk of recession.