- Further increase in foreign holdings in MGS in April 2015. Foreign holdings of MGS had increased further to RM157.6bil in April 2015 from RM151.4bil in March 2015 (+4.1% MoM). In terms of percentage of total outstanding MGS, the foreign holdings level was also higher at 47.0% in April 2015, compared to 45.2% in March 2015.

- The system loan-to-adjusted-deposit ratio (excluding foreign-held MGS) moved back to above 89%. Excluding foreign holdings in MGS, we estimate the industry’s gross loan-to-adjusted-deposit ratio to have moved to 89.6% in April 2015. This is following a brief respite in March, when the adjusted LDR eased to 88.9% in March 2015, from February 2015’s 89.7%.

- Liquidity retraced in April 2015 after brief improvement in the preceding month of March 2015. Overall excess net deposit (total deposit less loans) had consequently declined to RM315.9bil in April 2015, after a short improvement to RM321.7bil in March 2015 (February 2015: RM300.6bil). Excluding foreign holdings of MGS, we estimate excess net deposit (gross deposit less loans less foreign holdings in MGS) to have retraced to RM158.3bil in April 2015, following the short spike upwards to RM170.3bil in March 2015 (February 2015: RM154.9bil in February 2015).

- MGS yields remained stable in April 2015. The 10-year MGS yield was stable at 3.852% in end-April 2015, compared to 3.894% in end-March 2015. The most recent high recorded was 4.148% in end-December 2014.

- Maintain NEUTRAL. Based on the latest industry overall data, foreign holdings in MGS had continued to rise. Liquidity had retraced in April 2015, following a brief improvement in March 2015. We maintain our stance of a likely less ample domestic liquidity situation ahead given the still historically high foreign holdings of MGS. Maintain NEUTRAL on the sector.

Source: AmeSecurities Research - 1 Jun 2015