Malaysia’s Default Risk Drops for Sixth Day on Export Optimism

The cost of insuring Malaysian government bonds fell for a sixth day, the longest stretch of declines since May, on speculation an improving economic outlook in the U.S. will boost the Asian nation’s exports.

Home sales in the world’s largest economy unexpectedly climbed in July and manufacturing rose to a four-year high in August, official data showed last week. Malaysia’s gross domestic product increased the most in more than a year in the second quarter and overseas shipments advanced for a 12th month in June, according to reports this month.

“In Malaysia, we can have more sustainable, strong growth,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. “We have a strong rebound in the U.S. economy and that would be positive for Malaysian exports.”

Five-year credit-default swaps fell one basis point to 77.6 as of 5:17 p.m. in Kuala Lumpur, CMA data show. The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

The ringgit advanced 0.1 percent to 3.1600 per dollar, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 16 basis points, or 0.16 percentage point, to 5.75 percent.

Southeast Asia’s third-largest economy grew 6.4 percent in the second quarter from a year earlier, the fastest pace since the final three months of 2012 and exceeding the median estimate of economists for a 5.8 percent expansion, an Aug. 15 report showed. Overseas shipments advanced 7.9 percent in June from a year earlier, after climbing 16.2 percent in the previous month, according to data released Aug. 6.

Malaysian exports will benefit from the U.S. housing recovery and rising demand from China, Nomura Holdings Inc.’s Singapore-based economist Brian Tan wrote in an Aug. 22 research note.

The yield on Malaysia’s 4.181 percent sovereign bonds due July 2024 rose one basis point to 3.98 percent, data compiled by Bloomberg show. It has climbed nine basis points this month.

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