On September 27, Bank Negara Malaysia sold RM2.5 billion of the 30-year bonds, but while oversubscribed by 2.44 times, they failed to attract any foreign investors. — AFP pic

KUALA LUMPUR, Oct 8 — The dearth of foreign buyers for Malaysia’s new 30-year bonds suggested the global investment community’s lack of faith towards Malaysia’s financial health, PKR-backed Institut Rakyat has said.

According to the think tank, various insider reports have indicated the absence of foreign investors — a usual mainstay — in Malaysia’s inaugural 30-year sovereign bonds issued late last month.

“The foreign non-participation in such a momentous and eventful debt issuance could be a harbinger of further loss of interest among investors in Malaysia’s growth story should we fail to promptly address their valid concerns, which are valid for both foreign and domestic investors, or at least demonstrate assuring signs of taking steps in the right direction,” said IR in a statement yesterday.

On September 27, Bank Negara Malaysia (BNM) sold RM2.5 billion of the 30-year bonds, its longest-maturity offering yet.

Maturing at 2043, the bonds were priced at 4.935 per cent compared to the lower 3.7 per cent return offered by US Treasury bills of the same tenure. But while oversubscribed by 2.44 times, they failed to attract any foreign investors.

“The fact remains that only domestic institutional investors such as pension funds and insurance companies were keen. These are likely to hold the long-tenured bonds to maturity as part of their asset-liability management and not necessarily an indication of the bond quality,” IR added.

The think tank also noted that Malaysia’s sovereign debt issues, graded A- or A3 in the investment league, normally drew heavy foreign interest.

Data from BNM showed that, as at July, foreign investors owned 40 per cent of Malaysian government bonds, down from 46.8 per cent in June and 49.5 per cent in May.

IR suggested that the lack of foreign investors has been caused by Malaysia’s increased financial volatility and weak performance, including fears of twin deficits.

This included 2013’s budget deficit-to-gross domestic product (GDP) ratio that could reach 5.5 per cent after Putrajaya recorded another RM15 billion in additional operating expenditure in the recently tabled first Supplementary Bill 2013.

This ratio, it said, also exceeded the initial target of just 4 per cent set in Budget 2013.

Malaysia’s current account surplus also dropped to RM2.55 billion in the second quarter of 2013, compared to the quarterly average of RM23.93 billion between 2005 and 2012.

Meanwhile, public debt-to-GDP ratio also is expected to breach the legal ceiling of 55 per cent by year-end due to additional spending in 2013, making it among the highest in Southeast Asia.

Added to that, there are also fears that the US Federal Reserve might scale back its investment in the region and leading to persistent capital outflows, leaving the ringgit to depreciate in recent months.

In light of a first half performance, BNM had in August revised its outlook for 2013’s GDP growth from 5.6 per cent to between 4.5 and 5 per cent.

Putrajaya also decided to raise fuel pump price for the first time since 2010 this year as part of its move to consolidate its fiscal position, and reduce the federal government current account deficit-to-GDP ratio to 3 per cent by 2015.