- Foreign shareholdings of MGS rose significantly in May 2014. Foreign holdings of MGS increased further by RM2.6bil or 1.8% MoM to RM147.3bil in June, from RM144.7bil in May.

- Foreign holdings level of outstanding MGS, as a percentage of total MGS, rose to 46.7% in June 2014. In terms of percentage of total outstanding MGS, the foreign holdings level had therefore increased to 46.7% in June 2014, vs. 46.3% in May 2014.

- The system loan-to-adjusted-deposit ratio is estimated at close to 90% if excluding foreign-held MGS. Excluding foreign holdings in MGS, we estimate the industry’s gross loan-to-adjusted-deposit ratio to be higher at 89.8% in June 2014, compared to May 2014’s 89.5% on the same adjusted basis.

- Official industry LDR ratio rose to 85.8%. The official industry’s loan-to-deposit ratio (LDR) has climbed further to 85.8% in June 2014 from 85.4% in May 2014. This is the sixth consecutive month of LDR remaining above the 85% level – the highest in more than ten years since January 2004’s 85.9%.

- Excess liquidity is almost halved if excluding foreign holdings in MGS. Overall excess net deposit (total deposit less loans) was broadly unchanged at RM291bil in June 2014 (May 2014: RM293bil). Excluding foreign holdings of MGS, we estimate excess net deposit (gross deposit less loans less foreign holdings in MGS) to be lower at RM144bil in June 2014 vs. RM148bil in May 2014.

- MGS yields eased in June. On a more positive note, the 10-year MGS yield continued to ease to 3.89% in end-July, from 4.015% at end-June 2014, and 4.027% at end-May 2014.

- Maintain NEUTRAL. Based on latest industry overall data, we are maintaining our stance of a likely less ample domestic liquidity situation ahead given the high foreign holdings of MGS. Maintain NEUTRAL on the sector.

Source: AmeSecurities