Posted Date : 06 Apr 2011
MARC released the results of its maiden survey on the economy and bond market conducted in conjunction with its 2011 Investor Briefing on March 22. Questionnaires were distributed to bond market participants to gather their views on the domestic economy, market strategies, market developments, bond issuances as well as exchange rate movements expected for this year.
Mohd Razlan Mohamed, MARC’s CEO, said, “The survey, the first of its kind conducted by MARC, garnered 33 responses from key players in the domestic bond market, including fund managers, bank treasurers, advisors, researchers and investment bankers, among others.” He further added, “Notwithstanding the fairly small sample size, I believe that the survey findings provide interesting and useful insights into market expectations for the domestic economy and the performance of the ringgit bond market.”
In summary, the survey revealed that the majority of market players are confident that the economy will stay in recovery mode and agreed that inflationary risk is on the upside. It is important to note here that the survey was conducted amid the political unrest in the Middle East North Africa (MENA) region and after the earthquake and tsunami that struck Japan recently.
On the direction of the Overnight Policy Rate, 78.1% of survey respondents expect the central bank to hike the benchmark rate while 18.8% expect the rate hike to be put on hold in 2011. The majority of respondents predicting an interest rate hike during the year believe that the most likely quantum of the rate hike would be 25 basis points to 50 basis points. The ringgit is expected to remain strong for the near term, trading most likely in the range of 3.00 to 3.10 against the greenback.
A large majority of respondents anticipate that the yield curve will likely stay steep in 2011 with higher supply concerns dominating on the ringgit sovereign bond front, while the risky asset classes are expected to continue their rally over the same period.
Interestingly, the majority of respondents are less positive on the domestic corporate operating environment despite agreeing that the economy will remain in its recovery mode, with 69.6% anticipating a more difficult operating environment for corporates compared to only 13.0% of respondents who expect the operating environment to track economic recovery.
Meanwhile, there seem to be mixed views on the expected financing conditions, with 45.8% opining that corporations should not face any serious difficulties in raising funds via the debt capital market while another 41.7% expect tight financing conditions.
For a copy of the survey report, please visit MARC’s website at www.marc.com.my.