KUALA LUMPUR: RAM Ratings expects overall corporate bond issuance to reach RM120 billion- RM130 billion in 2023, propelled by private refinancing initiatives, continued infrastructurefinancing needs and financial institutions' capital augmentation plans.

It foresees Malaysian Government Securities (MGS) and Government Investment Issues (GII) to amount to RM170 billion-RM180 billion this year, taking into account the government's deficit financing requirement as well as the refinancing of debts maturing this year.

"With expectations that the monetary policy setting will progressively normalise as the US Federal Reserve (Fed) moves closer to the end of its tightening cycle, the Malaysian bond market should see more favourable fund flows in 2023," it said in a statement.

The rating agency said the primary bond market activity was robust last year, with total corporate bond issuance surging to RM153.0 billion, up from RM114.3 billion in 2021.

The prolific overall issuance last year was to a large extent fuelled by a major refinancing and fundraising exercise by Projek Lebuhraya Usahasama Bhd in December 2022, which contributed RM25.2 billion or 16.5 per cent of total corporate bond issuance.

Issuances from the financial (RM49.1 billion) and transportation and storage (RM44.0 billion)sectors dominated the primary bond market, together accounting for around 60.8 per cent of overall supply.

Overall foreign fund flows turned negative (RM9.8 billion) in 2022 amid the broad and persistent bond market selloff last year, the first net foreign outflow since 2018. Selloff pressure appeared to wane towards the end of 2022 as the Fed's messaging became less hawkish, hinting at a slower pace of rate hikes moving ahead.

MGS and GII registered a net foreign inflow for the second consecutive month in December 2022 (RM2.7 billion).