KUALA LUMPUR, Aug. 12 (Xinhua) -- Debt capital market issuance in Malaysia is likely to slow down in the second half of this year due to the government's gradual fiscal consolidation, with federal deficit expected to fall in the near term, Fitch Ratings said Monday.
"The impetus could come from financial institutions and corporate issuances as they seek to refinance and diversify funding," it said.
According to the rating agency, the debt capital market expanded 4.4 percent year on year to cross 550 billion U.S. dollars at end of the first half.
The market faces risks from ringgit, rates, commodity price volatilities, and global geopolitical events, Fitch noted.
Meanwhile, the market issuance in the first half fell 8.3 percent year on year to 45.2 billion dollars due to fiscal consolidation, with the government deficit in the first half of 2024 lower than the first half of 2023.
Around 60 percent of the first half of 2024 issuance was from the government and the rest from financial institutions, corporates, project finance, and others.
Fitch noted the Malaysian central bank is providing regulatory flexibility for multilateral development banks to issue ringgit sukuk and provide ringgit financing to resident entities without prior approval.
"A stronger ringgit could attract more non-resident holding of domestic government bonds. We expect the factors driving ringgit depreciation, including negative interest-rate differentials and portfolio investor sentiment, to wind down in the second half," Fitch said.
It also noted government efforts to support ringgit included encouraging government-linked companies to consistently repatriate foreign investment income and convert it to ringgit. ■