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

Ref No : 06/17/03 07 Jun 2017 Embargo : For immediate release    

The market has shown enhanced activities following the recent introduction of the second package of financial market development measures. Greater interest in emerging market financial assets globally has also resulted in an increase of non-resident investments into the domestic bond market with smaller volume into the equity market.

Ringgit strengthened by 1.4% in May and traded within the range of 4.26 to 4.35 against the USD to close at 4.28 as at month-end. The onshore foreign exchange market sustained a daily average volume of USD9.4 billion, of which trading volume for MYR currency pairs recorded a daily average of USD5.2 billion for the month of May (April: USD9.9 billion and USD6.2 billion respectively). Of this, the spot and forward transactions recorded an average of USD2.4 billion daily. The exchange rate remains stable with USD/MYR 1-month implied volatility at an average of 5.0% this year. Average intraday movement recorded a daily average of 89 points while the bid-ask spread recorded an average of 26.4 basis points since end-April 2017.

The Malaysian bond market continues to attract interest with the last three primary auctions of government bonds recording participation from diverse types of investors. The recent Malaysian Government Securities (MGS) auction recorded a healthy bid-to-cover ratio of 3.3 times. The average daily trading volume in the secondary bond market recorded a level of RM3.6 billion in May (Apr: RM3.7 billion). MGS short-selling volume has increased slightly to RM1.1 billion in May from a monthly average of RM872 million prior to the announcement. Non-resident holdings of government bonds increased by RM9.0 billion with more than 70% into medium to longer term papers, accounting for 26.3% of the total outstanding as at end-May 2017. The months of April and May has seen non-residents registering inflows of RM15.0 billion into the government bond market. This is in contrast to outflows observed between January to March, which recorded total government bond divestments of RM34.3 billion, of which 95% comprised short-term papers.

For the trade sector, data continues to indicate a more balanced FX flow between exports and imports. Net FX conversion for the month of May was USD1.1 billion. Year-to-date, a total of USD135 billion of foreign exchange transactions in relation to exports and imports of goods was recorded.

With the additional flexibility accorded to fund managers recently, an additional 10 fund managers registered in May, bringing the total number of registered fund managers to 44, with RM102.9 billion of eligible assets under management (AUM) under the dynamic hedging framework. In 2017, six additional non-resident banks have attested against offering or trading of ringgit non-deliverable forward (NDF) in the offshore market with a total of 22 institutions attested since November 2016. The Bank will continue to seek wider compliance to the non-facilitation rule from offshore financial market players.

Bank Negara Malaysia (BNM) and FMC will continue to engage all stakeholders to ensure successful implementation of initiatives introduced, while remaining focused in creating a conducive and orderly financial market environment to facilitate business and for the benefit of the economy.

Financial Markets Committee
7 June 2017

About Financial Markets Committee (FMC)
The FMC is a committee established by Bank Negara Malaysia (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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