- Foreign holdings of MGS came off marginally by RM3.1bil or 2.1% MoM to RM146.7bil in October 2014. This is in comparison to RM149.8bil in September 2014. In terms of percentage of total outstanding MGS, foreign holdings level had reduced accordingly to 45.9% in October 2014, compared to 46.9% in September 2014.

- The system loan-to-adjusted-deposit ratio (excluding foreign-held MGS) remained at above 90%. Excluding foreign holdings in MGS, we estimate the industry’s gross loan-to-adjusted-deposit ratio to have eased off marginally to 90.2% in October 2014, if compared to 90.7% in September 2014, and 90.4% in August 2014. This represents the third consecutive month that the adjusted LDR came in above 90% in recent times.

- Official industry LDR ratio had stabilised. Industry’s loan-to-deposit ratio (LDR) had stabilised at 86.6% in October 2014, compared to 86.8% in September 2014. Still, this is the tenth consecutive month of LDR remaining above the 85% level.

- Excess liquidity had almost halved if excluding foreign holdings in MGS. Overall excess net deposit (total deposit less loans) had improved on a month-on-month basis to RM288bil in October 2014, compared to RM283bil in September 2014. If excluding foreign holdings of MGS, we estimate excess net deposit (gross deposit less loans less foreign holdings in MGS) to have risen as well to RM142bil in October 2014, against a similarly adjusted RM133bil in September 2014. Thus, there was some improvement on a MoM basis. Nevertheless, overall excess liquidity had almost halved if we exclude foreign-held MGS from the deposit in the system.

- MGS yields were broadly unchanged. The 10-year MGS yield was broadly unchanged, with yield of 3.83% in end-October 2014, from 3.921% in end-September 2014.

- Maintain NEUTRAL. Based on the latest industry overall data, while there was some outflow in October 2014, the liquidity and yield had stabilised. Maintain NEUTRAL on the sector.

Source: AmeSecurities