Quarterly Market Outlook - 1Q2021 Global Markets January 2021 - Hong Leong Bank
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Quarterly Market Outlook
1Q2021
Global Markets
January 2021
Content
Macro Landscape
FX Outlook
Fixed Income Outlook
2
Global Growth Outlook
Real GDP
Latest 2 Quarters Actual Forecast Forecast (official)
(% YOY)
2Q20 3Q20 2019 2020 2021 2020 2021
World - - 2.9 -4.4(-3.9) 5.2 (5.2) -4.4(-4.9) 5.2 (5.4)
DM/ G10 -23.1 15.3 1.7 -5.2 (-5.8) 4.0 (4.2) - -
US -9.0 -2.8 2.3 -3.5 (-4.3) 3.9 (3.7) -2.4 (-3.7) 4.2 (4.0)
Eurozone -14.7 -4.3 1.2 -7.4 (-8.0) 4.6 (5.5) -7.3 (-8.0) 3.9 (5.0)
UK -20.8 -8.6 1.4 -11.3 (-10.0) 5.3 (6.3) -11.0 (-9.5) 7.3 (9.0)
Japan -10.3 -5.7 0.7 -5.3 (-5.7) 2.7 (2.5) -5.5 (-4.7) 3.6 (3.3)
BRICs -2.6 1.9 5.2 0.9 (0.6) 5.4 (4.9) - -
China 3.2 4.9 6.1 2.0 (2.1) 8.3 (8.0) - -
India* -23.9 -7.5 6.1 -8.5(-8.0) 9.2 (8.1) - -
Asia ex-Japan -2.4 1.7 5.3 0.8 (0.8) 5.5 (5.1) - -
EMEA -9.5 -2.0 2.5 -3.8(-4.5) 3.6 (3.8) - -
Source: Bloomberg, official sources
Figures in ( ) are previous forecasts
*FY ending Mar-21 and Mar-22 respectively
3Global Central Banks Policy Outlook
Current 1Q21 2Q21 3Q21 4Q21 Remarks
United States
Federal Reserve 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 No change in 2021
Fed Funds Rate
Eurozone
European Central Bank -0.50 -0.50 -0.50 -0.50 -0.50 No change in 2021
Deposit Rate
United Kingdom
Bank of England 0.10 0.10 0.10 0.10 0.10 No change in 2021
Bank Rate
Japan
Bank of Japan -0.10 -0.10 -0.10 -0.10 -0.10 No change in 2021
Policy Balance Rate
Australia
Reserve Bank of Australia 0.10 0.25 0.25 0.25 0.25 No change in 2021
Cash Rate
New Zealand
Reserve Bank of New Zealand 0.25 0.25 0.25 0.25 0.25 No change in 2021
Official Cash Rate
Malaysia
Potential cut/
Bank Negara Malaysia 1.75 1.75 1.75 1.75 1.75
Easing bias
Overnight Policy Rate
Thailand
Potential cut/
The Bank of Thailand 0.50 0.50 0.50 0.50 0.50
Easing bias
1-Day Repurchase Rate
Indonesia
Bank Indonesia 4.00 3.75 3.75 3.75 3.75 Plenty of room to cut
7-day Reverse Repo Rate
Singapore
Monetary Authority of Singapore - - On hold - On hold No change in 2021
SGD NEER
Source: Bloomberg, HLBB Global Markets Research 4US - Mixed recovery as job growth slowed; hope on more stimulus
8 'mil 'mil 30 • Slower labour market revival; surging coronavirus
7 Initial Jobless Claims -LHS cases pose downside risk to economic recovery.
25
6
Continuous claims (Lagged one
20
5 week), RHS • Consumer spending outlook is uncertain after
4 15 coming off the steep recovery; effect of first stimulus
3
10 checks had tapered off.
2
5
1
• A Democrats-controlled Congress alongside the
0 0
Biden Administration to offer more meaningful fiscal
15-Feb
07-Mar
28-Mar
03-Oct
24-Oct
14-Nov
05-Dec
26-Dec
18-Apr
30-May
09-May
11-Jul
01-Aug
22-Aug
12-Sep
04-Jan
25-Jan
20-Jun
expansion, instantly brightening spending prospect.
20
• Manufacturing expansion is expected to continue
15
Personal Spending, MOM % but weighed down by Covid-19 related supply
10 Retail Sales, MOM % constraint/disruption.
5
0 • The bright spot remains on the housing sector as
Mar-19
Mar-20
May-19
May-20
Apr-19
Jul-19
Apr-20
Jul-20
Feb-19
Oct-19
Feb-20
Oct-20
Aug-19
Sep-19
Nov-19
Dec-19
Aug-20
Sep-20
Nov-20
Jan-19
Jun-19
Jan-20
Jun-20
-5 low borrowing rates, change in working culture (ability
-10 to work from home) spurred suburban shifts.
-15 Downside remains the lack of (housing) supply.
-20
Source: Bloomberg, HLBB Global Markets Research
5Eurozone – Lockdowns to delay bloc’s recovery
15
10 Germany IPI, MOM %
• Extended and stricter lockdowns to delay
EU IPI, MOM % economic recovery. New Covid-19 strain poses
5
downside risk to economy despite vaccine
0
rollout.
Dec-19
Dec-18
Apr-18
Apr-19
Apr-20
Feb-18
Oct-18
Feb-19
Oct-19
Feb-20
Oct-20
Jun-18
Aug-18
Jun-19
Aug-19
Jun-20
Aug-20
-5
-10 • Pandemic related supply constraint to drag on
-15
overall manufacturing sector. Germany is
expected to remain a growth driver.
-20
8.8 • Unemployment rate has fallen from peak.
8.6 Sustained growth in manufacturing would
8.4
Unemployment Rate, %
recreate more employments but extended
8.2
lockdowns threatened services job.
8.0
7.8
7.6
7.4
7.2
7.0
Feb-18
Feb-19
Feb-20
Apr-18
Apr-19
Apr-20
Oct-18
Oct-19
Oct-20
Dec-18
Dec-19
Jun-18
Aug-18
Jun-19
Aug-19
Jun-20
Aug-20
Source: Bloomberg, HLBB Global Markets Research
6UK – Near term prospects falter amid raging pandemic
1200 5.1
• Near-to-medium term economic recovery
1000 4.9
prospect dampens considerably after third
UK Jobless Claims Change ('000), 4.7
800
LHS
lockdown was ordered.
4.5
600 Unemployment Rate, %, RHS
4.3 • Less generous job retention scheme
400
4.1 alongside stricter restrictions are negatives
200
3.9 for job market and retail sector - higher jobless
0 3.7 rate and jobless claims.
Feb-18
Apr-18
Oct-18
Feb-19
Apr-19
Feb-20
Apr-20
Oct-19
Oct-20
Dec-18
Dec-19
Jun-18
Aug-18
Jun-19
Aug-19
Jun-20
Aug-20
-200 3.5
• Post-Brexit adjustment/hiccup an added risk
20 potentially derailing recovery efforts
15
10 Retail Sales, MOM %
5
0
-5
-10
-15
-20
Apr-20
Feb-18
Apr-18
Feb-19
Apr-19
Feb-20
Oct-18
Oct-19
Oct-20
Dec-18
Dec-19
Aug-20
Jun-18
Aug-18
Jun-19
Aug-19
Jun-20
Source: Bloomberg, HLBB Global Markets Research
7Australia – Heightened dispute with China a new risk
300 8
200 7
100
• Gradual economic recovery after recent
6
0 emergence from hard lockdown in the Victoria
-100 5
state.
-200 4
-300 3
-400 Employment Change('000), LHS • Firms expected to raise employments as
2
-500 Unemployment Rate (%), RHS labour force also expanded.
-600 1
-700 0
• Growth in services sector - retail sales seen
Feb-18
Feb-19
Feb-20
Apr-18
Apr-19
Oct-19
Apr-20
Oct-18
Oct-20
Dec-18
Dec-19
Jun-18
Aug-18
Jun-19
Aug-19
Jun-20
Aug-20
improving post lockdown.
20
15 • Downside risk from trade dispute with China,
10 its biggest trading partner.
5
0
-5
-10 Retail Sales, MOM %
-15
-20
Apr-18
Apr-19
Apr-20
Feb-18
Oct-18
Feb-19
Oct-19
Feb-20
Oct-20
Dec-18
Dec-19
Jun-18
Aug-18
Jun-19
Aug-19
Jun-20
Aug-20
Source: Bloomberg, HLBB Global Markets Research
8Japan – Third virus wave dragging on already weak economy
3.5 15
3.0 10 • Manufacturing and international trade to benefit
2.5 5 from rebound in global demand. PMIs are pointing to
2.0 0 stabilisation at factories.
1.5 -5
1.0 -10 • Third virus wave an immediate threat to recovery
Household Spending, YOY % (RHS)
0.5 Japan Jobless Rate, % (LHS) -15 and could once again lead to rescheduling of the
0.0 -20 Tokyo Olympics resulting in economic losses.
Dec-18
Dec-19
Feb-19
Apr-20
Apr-18
Apr-19
Feb-18
Oct-18
Oct-19
Feb-20
Oct-20
Jun-18
Aug-18
Jun-19
Aug-19
Jun-20
Aug-20
• Consumer spending remains cautious as job
15 10
market weakened. Inflation is expected to remain
10 weak.
5 5
0
-5 0
-10
-15 -5
-20
Japan Export, YOY % (LHS)
-25 -10
Japan IPI, YOY % (RHS)
-30
-35 -15
Feb-19
Apr-20
Apr-18
Apr-19
Feb-18
Oct-18
Oct-19
Feb-20
Oct-20
Aug-18
Dec-18
Aug-19
Dec-19
Aug-20
Jun-18
Jun-19
Jun-20
Source: Bloomberg, HLBB Global Markets Research
9China – Positioning for pre-eminence
20 China’s key metrics continue their rebound (% YOY) • We forecast elevated 8% GDP growth in 2021,
15
10 supported by base effects. Growth is likely
5 consumer-led as Covid-19 vaccination spreads,
0
-5
confidence returns and labor market improves.
-10
-15 • Export growth (>9% YOY Aug-Nov 2020) has
-20
-25 also been strong and should persist. The
Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 recent RCEP deal is positive for intra-Asia trade.
Industrial production Retail sales Exports
• Inflation (particularly core) may start to
Forecasts 2020 2021
rebound from muted levels from mid-2021.
GDP (%) 1.7 8.0 We expect food inflation to taper off in contrast.
Inflation (%, Avg) 3.0 2.7 • We expect the People’s Bank of China to
maintain a neutral stance for now. PBOC
5Y LPR (%) 4.65 4.65 should allow modest CNY strengthening, while
injecting liquidity if needed. We do not expect
USD/CNY 6.53 6.25 many interest rate moves.
Source: Bloomberg, HLBB Global Markets Research
10Hong Kong – Piggybacking on China’s recovery
Total Exports: to China
HK$, bn
450
Total Exports to Others
Exports to China, %
%
40.0
• Economy showing more signs of
400 Total Exports YOY, %
30.0
stabilisation, although still in downturn.
350
20.0
300
• Prospect for recovery brightened alongside
250 10.0
200
firmer rebound in China. Hong Kong still
0.0
150 exports more than 50% of its goods to China and
-10.0
100 strong demand from Mainland set the course for
50 -20.0
its trade sector.
0 -30.0
2018 2019 2020
• Domestic demand is improving. Retail sales
40
30
narrowed its decline to single-digit recently,
20 Retail Sales, YOY % driven by purchases of durable household items.
10 Sales may improve further this month ahead of
0
Lunar New Year.
-10
-20
-30
-40
-50
May-18
May-19
May-20
Feb-18
Mar-18
Apr-18
Jul-18
Feb-19
Mar-19
Apr-19
Jul-19
Feb-20
Mar-20
Apr-20
Jul-20
Oct-18
Oct-19
Oct-20
Nov-18
Dec-18
Nov-19
Dec-19
Nov-20
Jun-18
Aug-18
Sep-18
Jan-19
Jun-19
Aug-19
Sep-19
Jan-20
Jun-20
Aug-20
Sep-20
Source: Bloomberg, HLBB Global Markets Research 11Singapore – Some bottlenecks against swift recovery
80
Divergent performance among export components (% YOY)
60
40 • A rebound in services sector activities is
20
0
likely to underpin GDP growth in 2021.
-20 Vaccination program will take place mostly in 1H-
-40 2021. Domestic sectors (services and
-60
construction) are likely benefit from improved
-80
-100 activity levels.
Jan-13 Jul-14 Jan-16 Jul-17 Jan-19 Jul-20
Oil exports Non-oil domestic exports Non-oil re-exports
• Export growth (particularly electronics)
should benefit from advance rebound in Asia
Forecasts 2020 2021
trade. Still, oil-related products are still in a
GDP (%) -5.8 6.3 slump and may persist for 1H-2021 (see chart).
Inflation (%, Avg) -0.2 0.5 • We expect Monetary Authority of Singapore
to maintain policy settings in April 2021.
3m SIBOR (%) 0.40 0.40 Inflation may still stay benign while financial
conditions stay fragile.
USD/SGD 1.32 1.285
Source: Bloomberg, HLBB Global Markets Research
12Vietnam – Outperforming ASEAN neighbours
9
8
GDP Growth YOY, % • Economy managed to stave off recession
7 thanks to low virus cases but global pandemic
6 sent annual growth level to the lowest in more
5 than 30 years.
4
3
2
• Manufacturing and trade sectors benefited
1 from US-China trade dispute and is set to
0 continue driving growth in 2021.
Jun-13
Mar-17
Mar-14
Jun-14
Mar-15
Jun-15
Mar-16
Jun-16
Jun-17
Mar-18
Jun-18
Mar-19
Jun-19
Mar-20
Jun-20
Dec-13
Sep-14
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Sep-13
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
• Government set ambitious growth target of
40 6.5% for 2021 (pre-pandemic 2020 target: 6.0%)
30
Vietnam IPI, YOY % anticipating further economic revival.
Exports, YOY %
20
10
0
Feb-19
Feb-18
Apr-18
Apr-19
Feb-20
Apr-20
Oct-18
Oct-19
Oct-20
Dec-18
Dec-19
Dec-20
Aug-20
Jun-18
Aug-18
Jun-19
Aug-19
Jun-20
-10
-20
Source: Bloomberg, HLBB Global Markets Research
13Malaysia – Cautious recovery in 2021
• Broad-based recovery expected from both
domestic and external front – aided by global
recovery, policy measures and low base effect
from last year’s slump
• Private consumption (~60% of GDP) expected
to turn around but remained subdued and below
long-run average, constrained by to softer job
market and consumer sentiments; but stimulus
measures will provide some support
Forecasts 2020 2021 • Overall investment to remain weak and see
narrower declines amid bleak business outlook
GDP (%) -6.0 5.4
• Net exports will remain a main growth pillar in
Inflation (%, Avg) -1.0 1.3
2021 as gains in exports outweigh imports
OPR (%) 1.75 1.75
• No change to OPR - BNM to maintain OPR at
USD/MYR 4.02 3.88 current accommodative level of 1.75%, barring
substantial shift in downside risk.
Source: Department of Statistics Malaysia, HLBB Global Markets Research
14FX Outlook
Q4-20A Q1-21 Q2-21 Q3-21 Q4-21 • We expect another year of dollar weakness. Without
significant fiscal impulse, the US Federal Reserve will likely
DXY 89.94 88.50 89.00 88.50 87.50 keep monetary policy at current accommodativeness.
Negative real US interest rates, a global recovery and
USD/CAD 1.273 1.255 1.260 1.240 1.230 market appetite for risky assets are usually dollar negative.
EUR/USD 1.222 1.245 1.240 1.245 1.255
• We expect some gains in EUR and GBP. Fundamentals
GBP/USD 1.367 1.385 1.375 1.385 1.400 are soft, even as a Brexit deal provides some relief to the
pound. However, the Eurozone and the UK should recover
USD/CHF 0.885 0.870 0.875 0.870 0.865 from a raging pandemic, as immunization rates rise.
AUD/USD 0.769 0.780 0.770 0.780 0.795 • Potential for commodity price recovery positive for
AUD, NZD, CAD, MYR. These G10 and other Asia
NZD/USD 0.718 0.730 0.725 0.735 0.745 currencies benefit from risk-on mood. Downside risk is that
the respective central banks resist from moving to negative
USD/JPY 103.25 102.5 103.5 103.0 101.0 interest rate policies.
USD/MYR 4.020 3.900 3.950 3.900 3.880 • A strong CNY may support other Asian currencies
(such as MYR and SGD). We are positive on intra-Asia
USD/SGD 1.322 1.305 1.310 1.300 1.285
trade leading the global recovery.
USD/CNY 6.503 6.350 6.400 6.350 6.250
Source: Bloomberg, HLBB Global Markets Research
15US Fixed Income – Upward pressure on yields amid recovery expectations
UST
- Upward pressure on UST yields were seen extending out from 5Y onwards with overall
benchmark yields settled between 0-23bps higher QOQ. The UST 2Y however
maintained at 0.12% whilst the much-watched UST 10Y spiked the most by 23bps at
0.91% as at end-4Q2020. The curve has steepened to its widest levels in four years.
- Expect the Republican-led govt to exert their influence and this could potentially lead to
Chart 1 upward pressure on both interest rates and inflation; as well as higher taxes to pay for
additional fiscal stimulus.
- With the recent additional $900b fiscal bill, expect no change in the monetary policy
side as the Fed Dot Plot projection show rates staying pat throughout 2021 and
extends up to 2023. The Fed may embark on yield-curve control and enhancing its
forward guidance. Potential tapering of the Fed’s bond-buying may ensue.
- Expect 10Y UST to range between 0.95-1.15% for 1Q2021 but we are generally
underweight nominal UST’s but akin to favor inflation-linked bonds .
Corporates
– On average about one third of IG Corporates which have an OAS spread of 100bps
have negative outlook or review from S&P; including 35% of all BBB’s; whilst Moody’s
is more sanguine at 20%. Issuances are expected to drop by 25% to $300b in 1Q2021
Chart 2 (2021: $1.3 trillion).
- Average HY issuances are expected at ~$70b for 1Q2021; the lowest among all
quarters; compared to the average of $108b per quarter last year (2020 total ~ $432b).
- We are still mildly positive on IG issuances that include energy and essential
services such as water, sewerage and power that are expected to maintain credit
standing.
Source: Bloomberg, HLBB Global Markets Research 16Malaysia Fixed Income – Re-rating and supply concerns may weigh on
bond yields
Government Bonds
- MYR government bonds saw the opposite of UST performance with the
curve bull-steepening QOQ; pivoted along the 10Y. Overall benchmark
yields ended between -15 to +3bps with the longer-ends slightly
pressured.
- Expect some upward pressure on yields based on our projected front-end
Include the govvies IYC curve just like you did for UST loading of supplies whilst taking cognizance of EPF’s restrained appetite for
1H2021.
- Following Fitch’s earlier downgrade, expect some nervousness ahead of
further potential rating announcements. FTSE Russell’s potential re-
classification of Malaysia bond weightage in the WGBI end-March is another
pivotal event.
- Our 10Y MGS yield target is 2.65-85% levels.
Corporate Bonds/Sukuk
- The consistent supply of GG-bonds due to the roll-out of mega
infrastructure projects should be monitored for signs of widening
yield-risk. However, decent demand metrics by the relatively wide base on
the buy-side should augur well on yield-carry requirements.
Chart 2 - We favour conglomerates, toll, utilities and also energy-related issuers
in the AAA (credit spreads ~43-70bps) and AA-space (credit spreads for
AA2 ~75-100bps) as economic recovery takes shape in 1Q2021.
- For yield-carry requirements, unrated bonds are an option. However many of
these issuances are from the property sector that may be highly leveraged.
Source: Bloomberg, BNM, HLBB Global Markets Research
17Malaysia Fixed Income – 2021 Auction Calendar
MGS/GII issuance pipeline in 2021
No Stock Tenure Tender Quarter Projecte Private
(yrs) Month d Placeme - Government bond tenders in 2020 ended the year on a weaker
Issuance nt X
Size average BTC ratio of 2.22x as opposed to the 2.54x in 2019.
(RM mil)
1 7-yr reopening of MGS (Mat on 06/28) 7 Jan Q1 3,500
2 15.5-yr new Issuance of GII (Mat on 7/36) 15 Jan Q1 3,000 1,500
3 10-yr Reopening of MGS (Mat on 04/31) 10 Jan Q1 4,000
- Total maturities in 2021 continue to be sizeable at ~RM73.7b.
4 5-yr Reopening of GII (Mat on 03/26) 5 Feb Q1 4,500 Gross MGS/GII supply is expected to rise to circa RM152.5b (net
5 20-yr Reopening of MGS (Mat on 05/40) 20 Feb Q1 2,000 2,500
6 7-yr Reopening of GII (Mat on 09/27) 7 Feb Q1 3,500 of projected RM6.0b SPK bond switch). On a net MGS/GII supply
7 30-yr Reopening of MGS (Mat on 06/50) 30 Mar Q1 2,000 2,000
8 10-yr Reopening of GII (Mat on 10/30) 10 Mar Q1 4,000 perspective, the estimated net supply of circa RM72.8b is more
9 5-yr Reopening of MGS (Mat on 09/25) 5 Mar Q1 4,500
10 20.5-yr New Issue of GII (Mat on 09/41) 20 Mar Q1 2,000 2,500
than 2020 and remains elevated compared to previous years.
11 7-yr Reopening of MGS (Mat on 06/28) 7 Apr Q2 4,000
12 15-yr Reopening of GII (Mat on 7/36) 15 Apr Q2 3,000 1,000
13 3-yr Reopening of MGS (Mat on 06/24) 3 Apr Q2 4,000 - Issuance supply for 2021 is slightly skewed towards the shorter
14 30-yr Reopening of GII (Mat on 11/49) 30 May Q2 2,000 2,000
15 15-yr Reopening of MGS (Mat on 05/35) 15 May Q2 3,000 1,500 tenures i.e. belly and also some long tenures i.e. 20Y with main
16 5-yr Reopening of GII (Mat on 03/26) 5 May Q2 4,000
17 10-yr Reopening of MGS (Mat on 04/31) 10 Jun Q2 3,500 1,000
targeted tenures still being within 3-15Y space.
18 3-yr Reopening of GII (Mat on 10/24) 3 Jun Q2 4,500
19 20-yr Reopening MGS (Mat on 05/40) 20 Jun Q2 2,000 2,000
20 15-yr Reopening of GII (Mat on 07/36) 15 Jul Q3 3,000 1,500 - Federal Government’s funding requirements are projected to be
21 5-yr Reopening of MGS (Mat on 11/26) 5 Jul Q3 4,000
22 10-yr Reopening of GII (Mat on 10/30) 10 Jul Q3 2,500 1,500 primarily funded onshore via issuances of MGS/GII save for the
23 30-yr Reopening of MGS (Mat on 06/50) 30 Aug Q3 2,000 2,500 scheduled USD800m foreign currency-denominated debt maturity
24 7-yr Reopening of GII (Mat on 08/28) 7 Aug Q3 4,500
25 3-yr Reopening of MGS (Mat on 06/24) 3 Aug Q3 4,000 by the Government of Malaysia (GOM) in July which is expected to
26 20-yr Reopening of GII (Mat on 09/41) 20 Sep Q3 3,000 1,500
27 10-yr Reopening of MGS (Mat on 04/31) 10 Sep Q3 3,500 1,000 be rolled over.
28 5-yr Reopening of GII (Mat on 03/26) 5 Sep Q3 4,000
29 7-yr Reopening of MGS (Mat on 06/28) 7 Oct Q4 4,000
30 30-yr Reopening of GII (Mat on 11/49) 30 Oct Q4 2,000 2,000 - Continued presence of foreign institutional investor appetite in view
31 5-yr Reopening of MGS (Mat on 11/26) 5 Oct Q4 4,000
32 10-yr Reopening of GII (Mat on 10/30) 10 Oct Q4 2,000 2,000 of the deluge of negative-yielding global debt and also relatively
33 15-yr Reopening of MGS (Mat on 05/35) 15 Nov Q4 3,000 1,500
34 3-yr Reopening of GII (Mat on 10/24) 3 Nov Q4 4,000 liquid and diversified local institutional base may help provide
35 20-yr Reopening of MGS (Mat on 05/40) 20 Nov Q4 2,000 2,000
36 7-yr Reopening of GII (Mat on 08/28) 7 Dec Q4 3,500
support; barring shocks from further sovereign rating changes and
37 3-yr Reopening of MGS (Mat on 06/24) 3 Dec Q4 3,000 FTSE Russell WGBI weightage changes.
Gross MGS/GII supply in 2021 152,500
Source: BNM, HLBB Global Markets Research 18Singapore Fixed Income – corporate supply-maturity mismatch may see
retail demand spike
SGS
% Benchmark SGS Yields SGS 2Y
3.50 – The SGS curve flattened overall as benchmark yields were pressured on
SGS 5Y
3.00 SGS 10Y the front-ends; closing mixed between -3 to +3bps QOQ. SGS bonds
SGS 20Y returned 8% for 2020; a feat unlikely to be repeated this year as MAS may
2.50
not continuously embark on using exchange rate as the main policy tool.
2.00 - The ultra-long debt may continue to outperform some of its peers as the
1.50 government taps on its large pool of fiscal reserves rather than borrowings to
1.00 finance various stimulus packages to combat the economic impact of the
0.50
virus pandemic.
- Generally we are neutral for 1Q2021 as gains may be capped despite the
0.00
flush global liquidity and limited supply relative to other markets.
06/16
03/20
12/15
03/16
09/16
12/16
03/17
06/17
09/17
12/17
03/18
06/18
09/18
12/18
03/19
06/19
09/19
12/19
06/20
09/20
12/20
Corporate
Corporate Bond maturities – With a relatively high savings rate, individual demand for corporate bonds
are likely to be sustained for yield-carry purposes; offsetting banks
proprietary appetite as loan books are expected to be on an uptrend on
expectations of an economic recovery as removal of movement restriction
and vaccine rollouts take place.
Chart 2 - Nevertheless, expect supply in 2021 to be outstripped by demand amid
bond maturities of SGD17.0b in 2021 (1Q2021: SGD4.5b); thus creating
demand mainly from retailers. The chart on the left reveals corporate bond
maturities in SGD for 2021.
- We like medium-duration in sectors that encompass financials,
conglomerates and state-owned entities.
Source: Bloomberg, HLBB Global Markets Research 19DISCLAIMER
This report is f or inf ormation purpos es onl y and does not take int o account t he i nvest ment obj ecti ves, financial situation or particul ar needs of any particul ar
recipient. The information c ont ained her ein does not constitut e the pr ovision of inves tment advice and is not intended as an of fer or solicitati on wit h res pec t t o t he
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