- Foreign shareholdings of MGS rose for the fourth consecutive month in July 2014. Foreign holdings of MGS rose further by RM6.7bil or 4.6% MoM to RM154.0bil in July 2014, from RM147.3bil in June 2014.

- Foreign holdings level of outstanding MGS, as a percentage of total MGS, moved up to 48.4% in July 2014. In terms of percentage of total outstanding MGS, the foreign holdings level had correspondingly increased to 48.4% in July 2014, from 46.7% in June 2014.

- July’s foreign holdings in MGS at second highest level since 2006. July’s foreign holdings in MGS in terms of percentage, is at the second highest level since 2006. The peak was 49.5% in May 2013, when foreign holdings in MGS was RM144.5bil.

- The system loan-to-adjusted-deposit ratio remained 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 unchanged at 89.8% in July 2014, vs. 89.8% in June 2014, on the same adjusted basis.

- Official industry LDR ratio eased to 85.5%. Industry’s loan-to-deposit ratio (LDR) had eased somewhat to 85.5% in July 2014. This is after recording a recent peak of 85.8% in the previous month of June 2014. This is the seventh consecutive month of LDR remaining above the 85% level – and is at the highest in more than ten years.

- Excess liquidity is almost halved if excluding foreign holdings in MGS. Overall excess net deposit (total deposit less loans) is better at RM299bil in July 2014, compared to RM291bil in June 2014. However, if excluding foreign holdings of MGS, we estimate excess net deposit (gross deposit less loans less foreign holdings in MGS) to be broadly unchanged at RM145bil in July 2014, compared to RM144bil in June 2014.

- MGS yields eased in June. 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