- Foreign shareholdings of MGS declined in August 2014. Foreign holdings of MGS declined by RM5.7bil or 3.7% MoM to RM148.3bil in August 2014 compared to RM154.0bil in July 2014.

- Foreign holdings level of outstanding MGS, as a percentage of total MGS, is lower at 47.3% in August 2014. In terms of percentage of total outstanding MGS, the foreign holdings level is now lower at 47.3% in August 2014, against 48.4% in July 2014.

- The system loan-to-adjusted-deposit ratio is now above 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 90.4% in August 2014 vs. 89.8% in July 2014. This is the first time the adjusted LDR came in above 90% in recent times.

- Official industry LDR ratio at a new recent peak. Industry’s loan-to-deposit ratio (LDR) has tightened further to 86.3% in August 2014, vs. 85.8% in July 2014. This surpassed the recent peak of 85.8% achieved in June 2014. This is the eighth consecutive month of LDR remaining above the 85% level.

- Excess liquidity has almost halved if excluding foreign holdings in MGS. Overall excess net deposit (total deposit less loans) is lesser at RM284bil in August 2014 (July 2014: RM299bil). If excluding foreign holdings of MGS, we estimate excess net deposit (gross deposit less loans less foreign holdings in MGS) to reduce to RM136bil in August 2014, compared to RM145bil in July 2014.

- MGS yields relatively stable in the past three months. The good news is that the 10-year MGS yield remained relatively stable, at 3.934% as at end-September 2014, if compared to 3.927% in end-August 2014 and 3.89% in end-July.

- Maintain NEUTRAL. Based on the latest industry overall data, we maintain 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