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Statement by Financial Markets Committee: Updates on the Malaysian Financial Market

Ref No : 05/17/03 05 May 2017 Embargo : For immediate release    

The second series of initiatives to develop the onshore financial market, which became effective on 2 May, has provided additional flexibility to fund managers and corporates to manage their foreign currency exposure. In addition, residents may now undertake short-selling activities to manage interest rate exposure. Together with the broader market developments which saw strengthening interest in emerging market financial assets, ringgit traded at 4.32 against the USD from 4.40 previously. 

The onshore foreign exchange market continues to record a daily average volume of USD10.0 billion, of which trading volume for MYR currency pairs has increased to a daily average of USD6.3 billion for the month of April (end-February 2017: USD5.2 billion). From this, the spot and forward transactions recorded an average of USD2.5 billion daily. The exchange rate remains stable with USD/MYR 1-month implied volatility recording a lower average of 4.5%. Average intraday movement recorded a daily average of 74 points while the bid-ask spread recorded an average of 24.3 basis points since end-February 2017.

The Malaysian bond market continues to be resilient. The last two primary auctions of government bonds recorded a healthy bid-to-cover ratio of more than 2 times. Average daily trading volume in the secondary bond market trended higher to RM4.2 billion. Non-resident holdings of government papers stood at 25.3% as at end April 2017. Since April, non-residents have recorded portfolio inflows into MGS with maturity of less than 3 years and above 5 years. Following higher market demand, MGS benchmark yields eased lower between 8 – 32 bps across the yield curve. As at end of April 2017, 34 fund managers have registered under the fund manager hedging framework with RM56.5 billion of eligible assets under management (AUM).

For the trade sector, a total of USD105 billion of foreign exchange transactions in relation to exports and imports of goods was recorded year to date. Data indicates a more balanced FX flows between exports and imports, consistent with the trade surplus in the current account. Year to date, exports conversion exceeds imports by USD919 million.

The FMC would also like to share an update on the Retail Negotiable Instruments of Deposit (RNID) Programme that was introduced in October 2016 to mobilise retail investors’ savings. Four banks have issued RNIDs for a total of RM55.4 million as at the end of March 2017. These have widened the range of products offered to the retail banking customers. The FMC expects this positive trend to continue and to see more banks issue RNIDs in the coming months as a viable tool to offer savers. This is part of an effort to enhance financial inclusion and literacy of the general public.

For further information and insight into RNID, please visit the Financial Markets microsite at www.bnm.gov.my.

Financial Markets Committee
5 May 2017

About Financial Markets Committee (FMC)
The FMC is a committee established by BNM in May 2016 and comprises representatives from Bank Negara Malaysia, financial institutions, corporations, financial service providers and other institutions which have prominent role or participation in the financial markets. The Chair of the FMC is BNM Assistant Governor Adnan Zaylani.

The objective of FMC is to broaden the industry engagement with a focus in reviewing and formulating comprehensive strategies for the wholesale financial markets to meet the diverse and complex demands of a more developed and internationally integrated economy. For more information on the FMC, please refer to the following link: http://www.bnm.gov.my/index.php?ch=en_fxmm_mo&pg=en_fxmm_fmc&ac=451&lang=en

 

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