my fixed income outlook 2015 flat curve, tread cautiously

December 08, 2014

Mala

ysi

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FIX

ED

IN

CO

ME R

ESEA

RC

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SEE PAGE 16 FOR IMPORTANTDISCLOSURES AND ANALYST CERTIFICATIONS PP16832/01/2013 (031128)

MY Fixed Income Outlook 2015

Flat curve, tread cautiously

The MGS curve is expected to move higher in 2015. Our target

levels for the 10y MGS yield is 4.10% for 1Q2015, 4.25% for

2Q2015, 4.30% for 3Q2015 and 4.30% for 4Q2015

We reiterate our near-term negative outlook on foreign flows.

We try to come up with a ballpark estimate of the foreign

outflows of total debt securities from the recent selloff. Our

straight-line fitted curve points to MYR11.6b of total outflows in

the past 1.5 months since the BNM last published October

foreign holdings data, but we think the actual outflows is higher

in the region of MYR20-25b, mostly from short-term bills/notes

While the MGS curve stood relatively firm at the beginning as

selloff was mostly on notes/bills, but recently the curve has

come under pressure. We expect the foreign holdings of MGS to

edge toward 40-42% in 1H2015 with risk of breaking the 40%

threshold

Further in this outlook report, we analyse the demand profile of

MGS by investor group. Based on the available data up till

9M14, banks and foreigners were major buyers of MGS, but we

expect these to slow in 2015 as the idiosyncratic weakness of

the MYR may reduce the attractiveness of MGS and we think

banks’ ramp-up of purchase on government bonds since 2H2013

may be partly due to “transitional demand” from regulatory

compliance, and such demand from banks may slow in 2015

The temporary comfort is that we have not seen a broad

reversal of EM flows. Of the countries that we cover for fixed

income foreign flows, we still see aggregate net inflows to the

region, although the stretch of uninterrupted monthly regional

net inflows since February may warrant some cautiousness

On government bonds supply, we maintain for now total gross

supply of MYR96b in 2015 including SPK. However, we see

additional supply risks as our economic research has widened

the forecast range for 2015’s fiscal deficit from 3.0% to 3.5%

and at the higher end of the widened forecast would mean an

additional ~MYR6b funding need and hence potentially more

MGS & GII issuance. Other supply risk is if the USD1.25

sovereign maturities are not refinanced in foreign currency.

On US Treasuries, we recommend to “mind the gap”, as the gap

between the “Fed Dots” i.e. the Fed’s median view of future

Fed Funds Rate (FFR) and the market implied short-term

forward rate remains wide. We expect gradual and steady rise

of the 10y UST yield with a target of 3.00% by end-2015

Analyst

Winson Phoon, ACA

[email protected] (603) 2074 7176

Se Tho Mun Yi

[email protected] (603) 2074 7606

Contents Market Review 2 Foreign Holdings Outlook 3 Demand Profile & Outlook 6 Government Bonds Supply 8 Yield Curve Outlook – UST 10 Yield Curve Outlook - MGS IRS 11 Private Debt Securities: -Issuance & Outlook 12 -Pipelines 13 -Credit Conditions 14

December 08, 2014 2

Malaysia: Fixed Income Outlook 2015

Market Review

A good year in global government bonds market. In general it has been a

good year in the global government bonds market as rates rallied under the

context of low interest rate and low volatility. The US Fed has completed

its QE Taper in October but pledged to maintain the Fed Funds Rate (FFR)

near zero for considerable time and keep is balance sheet size by

reinvesting/rolling over the securities bought under the previous asset

purchase programme. Weak economic data in the Eurozone and Japan has

continued to make the case for further monetary easing, while China cut

interest rate in November to lend support to its flagging economic growth.

Figure 1: Global 10y Government Bond Yield YTD Movement Figure 2: Bond and Equity Markets Volatility Index

Sources: Bloomberg, Maybank-IB Sources: Bloomberg, Maybank-IB

Malaysia flat flat curve. The already flat MGS curve grinded flatter and it

is the flattest among regional peers. 3y10y spread narrowed down to just

below 30bps from about 80bps at the start of the year, but as we write it

widens to 34bps. Volatility in the MGS market somewhat mirrored the

global low volatility environment with the 10y MGS yield staying in a rather

confined 53bps throughout the year, hinting a high of 4.30% in January and

a low of 3.77% in late-October/early-November. This is the second

narrowest band for yearly movement of 10y MGS yield in the past 10 years.

Figure 3: MGS Yield Curve Movement Figure 4: IRS Yield Curve Movement

Sources: CEIC, Maybank-IB Sources: Bloomberg, Maybank-IB

(350)

(300)

(250)

(200)

(150)

(100)

(50)

0

50

100

Au

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Can

ada

Fran

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Ge

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Jap

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om

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Ind

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Ind

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Mal

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Ph

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es

Taiw

an

Thai

lan

d

bps

Developed Countries EM Asia

0

10

20

30

40

50

60

70

80

90

0

50

100

150

200

250

300

Sep

-08

No

v-0

8Ja

n-0

9M

ar-0

9M

ay-0

9Ju

l-0

9Se

p-0

9N

ov-

09

Jan

-10

Mar

-10

May

-10

Jul-

10

Sep

-10

No

v-1

0Ja

n-1

1M

ar-1

1M

ay-1

1Ju

l-1

1Se

p-1

1N

ov-

11

Jan

-12

Mar

-12

May

-12

Jul-

12

Sep

-12

No

v-1

2Ja

n-1

3M

ar-1

3M

ay-1

3Ju

l-1

3Se

p-1

3N

ov-

13

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

No

v-1

4

MOVE Index (LHS) VIX Index (RHS)

2.90

3.40

3.90

4.40

4.90

0 5 10 15 20 25 30

MGS 31-Dec-13 30-Sep-14 5-Dec-14

3.00%

3.25%

3.50%

3.75%

4.00%

4.25%

4.50%

4.75%

0 2 4 6 8 10

IRS 31-Dec-13 30-Sep-14 5-Dec-14

December 08, 2014 3


Foreign Holdings Outlook

Near term negative on foreign flows. We reiterate our bearish near-term

outlook on Malaysia’s total debt securities flows as mentioned in our last

Fixed Income Foreign Flows report. While we continue to see long-term

real money’s interest in domestic government bonds especially MGS, the

pattern of foreign flows with heightened volatility of flows for certain

months with BNM MPC meetings suggests that there remains sizeable

amount of flows driven by monetary policy decisions that are likely to

be less sticky in nature.

Figure 5: Heightened volatility of foreign flows in months with MPC meetings (Total debt securities)

Sources: Bank Negara Malaysia, Maybank-IB

Recent sharp weakening of MYR is unnerving to the bond market. YTD

foreign holdings of total debt securities (all types of debt securities) still

stood at a cumulative net inflow of MYR17.7b as of end-October, but the

broad weakening of regional currencies on USD strength with the MYR

especially vulnerable due to weak oil prices is unnerving to bond market.

We noted large withdrawal of foreign funds from the short-term notes/bills

market. The sharp USDMYR move seems to have been “distilling” perhaps

some of the “hot money” type of carry trade flows.

Figure 6: Broad weakening of regional currencies on USD strength with the MYR especially vulnerable

Sources: Bloomberg, Maybank-IB

6.5

12.0

3.3

(11.1)(13.0)

(3.5)

16.1

7.0

(3.5)

1.4

(0.4)

2.1

(0.3)

1.1

13.5

(1.3)

9.1

(0.3)

(7.6)

1.8

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

Mar

-13

Ap

r-13

May

-13

Jun

-13

Jul-

13

Au

g-13

Sep

-13

Oct

-13

No

v-13

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r-14

May

-14

Jun

-14

Jul-

14

Au

g-14

Sep

-14

Oct

-14

MYR'b Total Debt Securities Monthly Flows

-0.7%

0.8%

-0.8%

-1.5%

-0.5% -0.6%

-2.0%

-2.9%

-5.0%

-0.2% -0.3%-0.9%

-1.5% -1.6% -1.7%

-4.4%

-6.1%-6.5%-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

INR PHP THB IDR CNY CNH TWD KRW MYR

1M FX Movement % YTD FX Movement %

December 08, 2014 4


Foreign outflows in the past 1.5 months since end-October may have

wiped off total YTD inflows. Judging from the pace of USDMYR movement,

it is very likely that there have been large foreign outflows since BNM last

published the October foreign holdings data. Using a simple straight line

fitted curve plotting the relationship of bond flows against USDMYR

movements, it points to MYR11.6b of foreign outflows for total debt

securities. But we think the actual outflows could be much higher than the

amount inferred by the straight line curve. Our ballpark estimate is that

around MYR20-25b of foreign holdings have exited the domestic bond

market since November primarily due to selloff in short-term securities

with less than 1 year in remaining maturity, essentially wiping off all of the

YTD (end-October) foreign inflows of MYR17.7b for total debt securities.

Figure 7: Total debt securities flows: We estimate some MYR20-25b of outflows driven by selloff in short-term notes/bills since November, higher than the MYR11.6b inferred by a straight-line fitted curve

Sources: Bank Negara Malaysia, CEIC, Maybank-IB

*Note: Straight line fitted curve plotting monthly total debt securities foreign flows against USDMYR MoM movement (%)

*Total debt securities comprise all debt instruments including BNM notes/bills, Treasury bills, MGS, GII, SPK and PDS

Selloff has so far been limited to short-term notes/bills, but MGS curve

is under pressure. Market is cautious against the risks of the extension of

selloff into the longer end parts of the curve, and we share the same

concerns. The MGS curve is performing relatively well and we think the

relative strength of MGS is due to the increased long-term real money

participation. But the transmission of bearish sentiment on expectation

of weak MYR also accompanied by more net supply of government

bonds have seen increased pressure to the MGS curve. In fact as we

write, the front to belly part of the MGS curve has started heading

north likely led by foreign flows.

R² = 0.4256

(30.0)

(20.0)

(10.0)

-

10.0

20.0

30.0

-8.0% -7.0% -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

USDMYR (%)

Debt Flows (MYR'b)

Estimated byfitted line

But we think the outflows are larger, in this region

December 08, 2014 5


2015 Outlook: MGS foreign holdings may edge down toward 40%-42%

with risk of breaking the 40% threshold in 1H2015. Going into the early

part of 2015, we expect MGS foreign flows to stay choppy with a downward

bias move. Adding to the risk is persistently low oil prices may increase the

idiosyncratic country fundamental weakness, with our economic research

widening the 2015 fiscal deficit forecast from 3.0% to 3.5% due to

potentially lower government revenue from oil. Recent Malaysia trade

balance data shows a sharply lower trade balance, but our economic

research opines that it is unlikely to see trade deficit and the current

account surplus is sustainable. Going into 2015, we think the MGS foreign

holdings level may decline toward 40%-42% with risk of breaking the 40%

threshold in 1H2015. Meanwhile, foreign absorption of net MGS supply is

expected to decline.

Figure 8: Expect foreign absorption of net MGS supply to edge lower on our near-term negative outlook (MGS)

Sources: Bank Negara Malaysia, CEIC, Maybank-IB’s estimate

48%77%

-1%

40%

169%158%

182%

58% 66%

0%

-50%

0%

50%

100%

150%

200%

(5.0)

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

10

M2

01

4

20

14

Fu

ll Yr

Est

.MYR'b

Net Foreign Demand (LHS)

Net MGS Supply (LHS)

Absorption Rate (Foreign Demand to Net Supply) % - (RHS)

December 08, 2014 6


Demand Profile & Outlook

Below is a summary of the trend and our outlook for the demand of

government bonds in 2015.

Trend Outlook

Foreigners Major buyers. Major source of demand for

MGS especially from 2010-2012 during

these periods foreigners absorbed 158%-

182% of the yearly net MGS supply. Since

2Q2013 foreign flows have turned choppy

but foreigners still remain as net

purchasers of MGS with real and long-term

type of demand. YTD net MGS inflows

total MYR9.6b as of end-October, but

recent outflows have likely cut this.

Demand to slow. We think there is still demand on

MGS and the regional flows sentiment remains

positive. However, the idiosyncratic fundamental

risk of Malaysia due to depressed oil prices and the

persistent weakness of MYR against the USD may

prompt some country-specific outflows from

Malaysia. We expect diminishing share of foreign

ownership in MGS toward 40%-42% with risk of

breaking the 40% threshold in 2015.

Banks & FI Major buyers. Banks & FI’s holdings of

government bonds stayed almost static

from 2011 to 1H2013, but since 2H2013

banks & FI have ramped up the purchase

of both MGS and GII. In 2014 Banks & FI

are the major sources of demand for

government bonds, absorbing the majority

of net MGS supply and all of net GII supply.

Demand to slow. While there could be multiple

perspectives to what drives banks’ rise of demand

on government bonds, we think a combination of

banks’ asset growth and that certain Basel III

compliance ratio will begin to come into force in

2015 especially with the liquidity coverage ratio

(LCR) favouring government securities as one of the

Level 1 High Quality Liquid Assets (HQLA) may have

propped up the “transitional demand.” After a

period of observation reporting, the LCR compliance

will begin in 2015 at 60% with gradual phase in until

a full 100% compliance in 2019. If the thought of

transitional demand holds, we think banks’ demand

on government bonds will stay but start to slow

from 2015. The first regulatory submission dates of

LCR are in July 2015 so there may still be

transitional demand in 1H2015 but we believe that

most are well prepared. Also, between GII and MGS,

we think banks will continue to favour GII due to

attractive pickup for asset liability management

(ALM) or regulatory compliance purposes.

Pension Funds Major sellers. Pension funds especially the

EPF was in the past “a whale in the

market” with majority ownership (>50%)

of total outstanding MGS until late-2008,

but the appetite of pension funds on MGS

has been decreasing since then. The EPF

and KWAP’s combined share of ownership

of MGS has declined to 21%. In 2014 YTD

pension funds are the major net sellers of

MGS and marginal sellers of GII.

Marginal demand. While domestic government

bonds will remain as a key part of pension funds’

asset allocation, the share of allocation will remain

low relative the pace of their growth in funds size in

2015 as the existing yield levels are not attractive

and pension funds overseas asset diversification

drive should continue into 2015. Further, pension

funds’ preference to buy GII instead of MGS will stay

as long as there is still good spread over MGS and

this makes economic sense as, although the

purchase may be for ALM, liquidity or trading

purposes, most of the MGS & GII of EPF are intended

to hold to maturity.

Insurance Companies Marginal sellers. Insurance companies’

ownership of government bonds has been

low accounting for only 7% and 4% of total

outstanding MGS and GII and the share of

ownership has been declining. On

aggregate insurance companies are the

marginal net sellers of both MGS and GII.

Marginal sellers. Insurance companies’ asset

allocation to government bonds have been low

relative to their assets size and also low relative to

the pace of growth of their asset size in recent

years, as they have a bigger role in the PDS market.

We think the trend will continue into 2015 and we

expect insurance companies to remain as marginal

net sellers.

December 08, 2014 7


Figure 9: MGS – Foreigners and banks are major buyers of MGS in 9M2014

Figure 10: GII - Banks have absorbed all net GII supply in 9M2014

Sources: Bank Negara Malaysia, Maybank-IB Sources: Bank Negara Malaysia, Maybank-IB

Figure 11: MGS – Ownership Profile by Type of Investors Figure 12: GII - Ownership Profile by Type of Investors


*Ownership under “others” category is insignificant and not displayed


*Ownership under “others” category is insignificant and not displayed

14.5

(5.0)

0.1

8.9

3.7

6.8

(4.0)(5.9)

(0.8)

0.7

6.5

(4.6)

3.6 5.0

(0.4) (0.6)

2.5

(2.9)

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

Net MGSSupply

PensionFunds

InsuranceCompanies

Banks & FI Foreigners Others

1Q2014 2Q2014 3Q2014

5.5

0.6

(0.8)

5.9

0.4

(0.5)

10.0

(1.2)

0.1

7.2

3.7

0.2

(3.5)

0.3

(0.6)

1.0

(3.2)

(1.0)

(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

8.0

10.0

12.0

Net GIISupply

PensionFunds

InsuranceCompanies

Banks & FI Foreigners Others

1Q2014 2Q2014 3Q2014

25% 26%24% 24%

21% 20% 21%

8% 8% 8% 8% 8% 7% 7%

16% 16%20% 20%

22% 22% 22%

47% 47%43%

45% 44%47% 47%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014

Pension Funds Insurance Companies Banks & FI Foreigners

42% 43% 41% 41% 40%37% 38%

5% 5% 5% 5% 5% 4% 4%

43% 43% 45% 46% 48% 49% 50%

1% 2% 2% 2% 2% 4% 2%0%

10%

20%

30%

40%

50%

60%

1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014

Pension Funds Insurance Companies Banks & FI Foreigners

December 08, 2014 8


Government Bonds Supply

2015: Total government bonds supply of MYR96b. In our previous report

Auction Calendar 2015, we revised our 2015 gross supply estimate higher

to MYR90b for MGS & GII (previous estimate: MYR86-89b) primarily because

of higher-than-expected bond maturities of around MYR53.6b (previously

we expected more debt switches). Including the MYR35.7b estimate of

funding need for fiscal deficit that we maintain, gross MGS & GII supply

total MYR89.3b rounding up to MYR90b. We expect a MGS-GII mix of 55:45

therefore MYR49.5b for MGS and MYR40.5b for GII. On top of the MYR90b,

we also estimate an additional MYR6b from SPK issuance from the three

scheduled SPK auctions. This means total government bonds supply will

total MYR96b similar to 2014.

Supply risk #1: Potentially wider fiscal deficit. The above estimate of

next year’s gross government bond supply is based on the government

meeting its 3.0% fiscal deficit target in 2015. Any slippage in meeting the

target would mean additional funding requirement by the government

likely to be funded via additional issuance of MGS & GII. Our house view

has widened the forecast of fiscal deficit from 3.0% to 3.0-3.5%. It is not a

clear-cut formula that lower government revenue would surely result in

higher deficit as the government can still tighten budgeted

operating/development expenditure to control the deficit. But if the

deficit is at the wider end of 3.5%, this could mean about MYR6b additional

funding need and therefore more MGS & GII issuance.

Supply risk #2: If USD maturities are not refinanced in foreign currency.

We mentioned in our last quarterly report that we could see a USD

Malaysian sovereign issuance next year in order to refinance the USD1.25b

previously raised under the SPV of 1Malaysia Sukuk Global Bhd which is due

to mature on 4th June 2015. We still maintain the view as it makes sense to

maintain an active USD sovereign curve and the government only has very

small share of foreign currency denominated debt. But if the USD maturity

is not refinanced in foreign currency we might see additional an MYR4-4.5b

of domestic govvy issuance albeit less likely.

Supply dynamics may pressurise the curve in 2Q15. Firstly, we don’t

think next year’s overall MYR96b government bonds supply is overly

burdened. In fact net supply will be marginally lower if we leave aside the

abovementioned supply risks. But the pattern of bond maturities with no

redemptions in 2Q15 and that BNM has scheduled for a total of nine

auctions including SPK, the most of all four quarters, may mean that 2Q14

is a quarter to watch for and perhaps to position more defensively. Supply

profile is unfavourable with an estimated MYR27b gross and net issuance.

This could translate into more upward pressure to the yield curve and the

bearishness may be compounded if inflations go north post the GST

implementation from April 2015. Further, there may be additional risks

from the external front if the US interest rate is guided higher just a

couple of months before the first Fed Funds Rate hike that our economics

research currently pencil in for late-3Q2015.

December 08, 2014 9


Figure 13: Supply Profile to Pressurise the Curve in 2Q2015 Figure 14: List of Government Bonds Maturity in 2015

Sources: Bank Negara Malaysia, Maybank-IB’s estimate

*Including MGS, GII & SPK

Sources: Bank Negara Malaysia, Maybank-IB’s estimate

*Including MGS, GII & SPK

26.5 27.0

22.5 20.0

13.8

-

31.5

8.2 12.7

27.0

(9.0)

11.8

(15.0)

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

1Q 2Q 3Q 4Q

MYR'bGross Supply Maturity Net Supply Maturity Date Stock Name Amount (MYR'b)

27-Feb-15 MGS 4/2009 3.741% 27.02.2015 11.8

16-Mar-15 PROFIT-BASED GII 1/2005 16.03.2015 2.0

31-Jul-15 PROFIT-BASED GII 1/2012 31.07.2015 4.0

15-Jul-15 PROFIT-BASED GII 4/2010 15.07.2015 3.0

12-Aug-15 MGS 1/2010 3.835% 12.08.2015 10.0

30-Sep-15 MGS 2/2005 4.720% 30.09.2015 11.0

30-Sep-15 PROFIT-BASED GII 2/2010 30.09.2015 3.5

15-Oct-15 MGS 3/2012 3.197% 15.10.2015 8.2

TOTAL 53.6

December 08, 2014 10


Yield Curve Outlook – US Treasury

Mind the gap. The gap between the “Fed Dots” i.e. the Fed’s view of

future Fed Funds Rate (FFR) and the market implied short-term forward

rate remains wide. The gap is estimated at 0.65% for end-2015 and 1.32%

for end-2016. The recent release of the US’s November data shows that

while labour participation rate stayed at a low 62.8%, nonfarm payrolls

however surprised on the upside at 321,000 (Prior: 214,000, Consensus:

230,000) and unemployment rate remained at a stable 5.8%. Currently our

house view guide for the first FFR hike in late-3Q15 with a total increase of

50-75bps by end-2015.

Expect gradual and stable rise in yields. We think the US Treasury yields

will continue to re-price upward albeit on a gradual and stable path. The

relatively stable US inflation expectation and modest wages growth may

mean that despite the rise in FFR the 10y US Treasury yield could remain

relatively steady. Adding to the yield anchoring effect is the prospects of

both ECB and BoJ to aggressively expand their balance sheets in 2015. Net

net, we expect the 10y UST yield to increase gradually reaching 3.00% by

end-2015.

Figure 15: “Fed Dots” versus market implied short-term forward rate

Sources: Bloomberg, Fed Reserve, Maybank-IB’s estimate

*FOMC median/Fed dots refer to the median of FOMC participants’ view on future FFR from the Fed’s projection materials

1.375

2.875

3.75

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

De

c-0

5

Jun

-06

De

c-0

6

Jun

-07

De

c-0

7

Jun

-08

De

c-0

8

Jun

-09

De

c-0

9

Jun

-10

De

c-1

0

Jun

-11

De

c-1

1

Jun

-12

De

c-1

2

Jun

-13

De

c-1

3

Jun

-14

De

c-1

4

Jun

-15

De

c-1

5

Jun

-16

De

c-1

6

Jun

-17

De

c-1

7

Jun

-18

De

c-1

8

Historical FFR Market Implied ST Fwd FOMC Median (Sep)

Thegap

Marketpricing

Feddots



Yield Curve Outlook – Malaysia MGS & IRS

MGS curve to move higher. We expect the MGS curve to move broadly

higher in 2015 with a slight steepening bias. Although the curve has

already been re-priced upward recently, we think there is still room to

cheapen further in 2015 with the following targets by end-2015: 3y:

3.85%, 5y: 4.05%, 7y: 4.20%, 10y: 4.30%, 15y: 4.50%, 20y: 4.70%, 30y:

4.85%.

Our quarterly target level for the 10y MGS yield is as follows:

1Q2015: 4.10%

2Q2015: 4.25%

3Q2015: 4.30%

4Q2015: 4.30%

Key macro assumptions that underpin our MGS yields forecast is our

expectation of a persistently elevated USDMYR pair and higher yields

environment in the US with the first FFR hike in 3Q15, and with the data-

dependant caveat means that this may be brought forward if the US

economy surprises on the upside. On the domestic front, our economic

research expects inflations to print higher in the region of 4-5% next year

and currently pencil in a 25bps hike in OPR near late-2015.

While the expectation of higher inflations is primarily due to one-off effect

from GST implementation from April 2015, this will nonetheless have some

bearing on market sentiment. In combination with the concentration of net

govvy supply in 2Q2015, we are more cautious about the first half of 2015

especially the second quarter may see more pressure to the curve.

Meanwhile, the IRS curve is also expected to be higher and steeper, with

the following targets: 1y: 3.95%, 3y: 4.05%, 5y: 4.20%, 7y: 4.30% and

10y: 4.40%.

Figure 16: MGS – Forecast of Yield Curve Figure 17: IRS – Forecast of Yield Curve

Sources: Bank Negara Malaysia, Maybank-IB Sources: Bloomberg, Maybank-IB

2.80

3.30

3.80

4.30

4.80

0 5 10 15 20 25 30

MGS 5-Dec-14 End-2015F

3.25%

3.50%

3.75%

4.00%

4.25%

4.50%

4.75%

0 2 4 6 8 10

Interest Rates Swap 5-Dec-14 End-2015F



Private Debt Securities (PDS)

PDS: Issuance & Outlook

YTD gross PDS issuance total MYR75.4b as of 5th Dec 2014 with full year

total likely in the region of MYR80b. Notable issuance in 4Q14 includes the

Danainfra MYR2.4b re-tap with the MRT funding vehicle having raised a

total of MYR7.5b this year and MYR14.1b since 2012. Other large PDS

supply in the quarter include YTL Power International’s MYR1b MTN and

the regular Cagamas issuing a total of MYR2b comprising MYR1b each from

its MTN and IMTN facilities.

By ratings, quasi-govvy debt is still a key source of supply accounting for

32.1% of YTD issuance. AAA and AA rated papers took up 19.5% and 36.3%

respectively while the rest comes from lower-rated or unrated. By sectors,

infrastructure/utilities and financial service issuers still dominates the PDS

issuance landscape with a combined 69.7% share.

2015: Expect gross PDS supply to increase marginally to MYR85b. In

view of stable macroeconomic environment next year and the deferral of

certain large supply, we expect a slightly higher gross PDS supply of

MYR85b in 2015.

Figure 18: Gross PDS Issuance YTD MYR75.4b (as of 5th Dec) Figure 19: 2014 YTD Issuance by Tenor at Issuance

Sources: Bloomberg, BPAM, Maybank-IB Sources: Bloomberg, BPAM, Maybank-IB

*Using data as of 5th Dec

Figure 20: 2014 YTD Issuance by Ratings Figure 21: 2014 YTD Issuance by Sectors

Sources: Bloomberg, BPAM, Maybank-IB


Sources: Bloomberg, BPAM, Maybank-IB


52

70

121

84

75.4

0

20

40

60

80

100

120

140

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

MYR'b2010 2011 2012 2013 2014YTD ≤ 3y

11.0%

4-5y22.6%

6-10y43.9%

11-20y15.9%

> 20y6.5%

Quasi Govvy32.1%

AAA19.5%

AA36.3%

A or lower4.2%

Others (incl. NR)8.0%

ASSET-BACKED SECURITIES

2.1%

CONSTRUCTION AND

ENGINEERING3.5%

DIVERSIFIED HOLDINGS

8.8%

FINANCIAL SERVICES

36.0%

INDUSTRIAL PRODUCTS

1.5%

INFRASTRUCTURES AND UTILITIES

33.6%

PLANTATION AND AGRICULTURE

2.5%

PROPERTY AND REAL ESTATE

10.5%TRADING & SERVICES

1.4%



PDS: Pipelines

Issuer Currency

Facility (MYR

'b)

Issued

(MYR 'b)

Unissued

(MYR 'b) Rating

AirAsia Bhd MYR 1 Not rated

Aman Sukuk MYR 10 6.26 3.74 AAA

AmIslamic Bank Bhd (subordinated sukuk) MYR 3 0.35 2.65 AA3

Bank Islam MYR 1 A1

Bank Muamalat (Senior Sukuk) MYR 2 2 A

Bank Rakyat (Imtiaz Sukuk II Berhad) MYR 9 2 7 AA2

Berjaya Land Bhd MYR 0.65 AAA (fg)/(bg)

BGSM Management Sdn Bhd MYR 10 7.2 2.8 AA3

Bumitama MYR 2 1 1 AA3

Cagamas Bhd (MTN) MYR 20 10.655 9.345 AAA

Cagamas Bhd (IMTN) MYR 20 13.147 6.853 AAA

Cendana Sejati Sdn Bhd (Senior Sukuk) MYR 0.36 0.36 AA1

CIMB (Tier-2 subordinated debt) MYR 10 1.05 8.95 AA+

CIMB Islamic (Tier-2 Junior Sukuk) MYR 5 5 AA+

DanaInfra Nasional Bhd (MRT) MYR 21 14.1 6.9 GG

DRB-HICOM Berhad (Perp Sukuk) MYR 2 A

Eastern & Oriental Bhd (E&O) MYR 0.5

Export-Import Bank of Malaysia Bhd USD

Felda Global Ventures Holdings Bhd (exchangeable sukuk) USD 1 1

First Gulf Bank PJSC MYR 3.5 3.5 AAA

GENM Capital Bhd MYR 5 5 AAA

Golden Assets International Finance Limited MYR 5 2.625 2.375 AA2(s)

Hong Leong Bank Berhad (Tier-2 subdebt) Multi 10 0.5 9.5 AA2

Hong Leong Islamic Bank Berhad (Tier-2 subdebt) MYR 1 0.4 0.6 AA2

IJM Corp Bhd MYR 3 0.8 2.2 AA3

IOIP Capital Management (IOI Properties) MYR 1.5 0.75 0.75 Not Rated

Jimah East Pow er MYR 8.4 AA-

Khazanah (Danga Capital) Multi 10 2.5 7.5 AAA

Khazanah (Rantau Abang Capital) MYR 7 4.8 2.2 AAA

Kuveyt Turk MYR Up to MYR2b

Midciti Sukuk Berhad MYR 3 1.555 1.445 AAA

MAHCO Malaysia Sdn Bhd MYR 0.3 0.3 AAA

Malaysia Airports Holdings Bhd (MAHB) MYR 2.5 1.5 1 AAA/AA2

Malaysian Resources Corporation Berhad MYR 0.68 0.248 0.432 Not Rated (PP only)

Malayan Banking Bhd (Subdebt) MYR 7 3.7 3.3 AA1

Maybank Islamic (Subdebt) MYR 10 1.5 8.5 AA1

Malaysia Marine and Heavy Engineering (MMHE) MYR 1 1

Mudajaya Corporation Berhad (CP/MTN) MYR 1 0.36 0.64 AA3

Northport (Malaysia) Bhd (Sukuk Musharakah) MYR 1.5 AA-

Pelaburan Mara Berhad MYR 1 1

Pengurusan Air SPV Bhd (PASB) MYR 20 10.45 9.55 GG

Petronas Dagangan MYR 2 0.3 1.7 AAA

Point Zone (M) Sdn Bhd (KPJ) MYR Up to MYR1.5b

PTPTN MYR 5 3.5 1.5 GG

Public Bank (Tier-2 Subordinated MTN) MYR 10 1.95 8.05 AA1

Public Bank (Senior MTN) MYR 5 1.4 3.6 AAA

Puncak Wangi Sdn Bhd MYR 0.2 0.04 0.16 AAA(fg)

Putrajaya MYR 3 1.6 1.4 AAA

Sabah Credit Corporation (ICP & IMTN) MYR 1.5 0.68 0.82 AA1

Saraw ak Energy Berhad MYR 15 7 8 AA1

SME Bank MYR 3 1.5 1.5 GG

Societe Generale (Sukuk) MYR 1 1 AAA

Sunw ay Berhad (CP/MTN) MYR 2 0.715 1.285 A2

Sunw ay Treasury Sukuk Sdn Bhd (IMTN/ICP) MYR 2 2 A2

Suria KLCC (Sukuk Murabahah) MYR Up to MYR0.6b AAA

Telekom Malaysia Berhad (ICP/IMTN) MYR 3 1.4 1.6 AAA

Temasek Ekslusif Sdn Bhd (Gamuda cg) MYR 1 0.3 0.7 AA3

UEM Sunrise MYR 2 1.7 0.3 AA-

UMW Holdings Bhd (Sukuk Musharakah) MYR 2 0.44 1.56 AAA

UniTapah Sdn Bhd MYR 0.6 AA2

WCT Holdings Bhd MYR 1.5 0.6 0.9 AA-

Source: Various newspapers, online news articles, market talk

* Maybank-IB’s estimates



PDS: Credit Condition

In terms of rating changes, 4Q14 reported an even split of 2 upgrades and

2 downgrades. On upgrades, ORIX Leasing Malaysia Bhd was notched up

from A1 to AA3 by RAM premised on its strengthened credit fundamentals,

while Premium Commerce Bhd’s credit rating was raised by two notches by

RAM from AA2 to AAA due to better-than-expected performance of its

securitised pool of assets and stronger collateral coverage. On downgrades,

New Pantai Highway’s MYR250m junior notes were notched down from AA3

to BBB2 because of the expiry of corporate guarantee, while Tesco Stores

(Malaysia) Sdn Bhd MTN rating was unsurprisingly cut again by MARC from

AA+ to AA due to the weakening of its UK parent’s profile.

In terms of outlook revisions, 4Q14 reported 13 outlook increases and no

outlook decrease, but all of the positive outlook revisions are related to

the three-way merger of CIMB-RHB-MBSB. Both RHB and MBSB related

issues including bank guarantees have benefited from positive outlook

revision by RAM. Otherwise it would have been a quiet quarter without any

notable outlook changes.

Figure 22: Rating Upgrades vs Downgrades (as of end-Nov) Figure 23: Rating Outlook Revisions(as of end-Nov)

Sources: RAM, MARC, Maybank-IB

*For years 2010-2011, defaults were classified as downgrades

Sources: RAM, MARC, Maybank-IB

Figure 24: Credit Spread – 5 years (as of end-Nov) Figure 25: Credit Spread – 10 years (as of end-Nov)

Sources: Bank Negara Malaysia, CEIC, Maybank-IB Sources: Bank Negara Malaysia, CEIC, Maybank-IB

-20

-15

-10

-5

0

5

10

15

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

Defaults Downgrades Upgrades

-15

-10

-5

0

5

10

15

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

Outlook Decrease Outlook Increase

51

72

88

108

0

20

40

60

80

100

120

140

160

Jan

-13

Mar

-13

May

-13

Jul-

13

Sep

-13

No

v-1

3

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

No

v-1

4

AAA 5 AA1/AA+ 5 AA2/AA 5 AA3/AA- 5

90

116

137

162

0

20

40

60

80

100

120

140

160

180

200

Jan

-13

Mar

-13

Ma

y-1

3

Jul-

13

Sep

-13

No

v-1

3

Jan

-14

Ma

r-1

4

Ma

y-1

4

Jul-

14

Sep

-14

No

v-1

4

AAA 10 AA1/AA+ 10 AA2/AA 10 AA3/AA- 10



Research Offices

REGIONAL

WONG Chew Hann, CA

Regional Head of Institutional Research

(603) 2297 8686 [email protected]

ONG SengYeow

Regional Head of Retail Research

(65) 6432 1453

[email protected]

Alexander GARTHOFF

Institutional Product Manager

(852) 2268 0638

[email protected]

ECONOMICS

Suhaimi ILIAS

Chief Economist

Singapore | Malaysia

(603) 2297 8682

[email protected]

Luz LORENZO

Philippines

(63) 2 849 8836

[email protected]

Tim LEELAHAPHAN

Thailand


JUNIMAN

Chief Economist, BII

Indonesia

(62) 21 29228888 ext 29682

[email protected]

Josua PARDEDE

Economist / Industry Analyst, BII

Indonesia

(62) 21 29228888 ext 29695

[email protected]

MALAYSIA

WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy • Construction & Infrastructure

Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance

LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas - Regional • Shipping

ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional

Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem

YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media

TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos

WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property & REITs

LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove Producers

CHAI Li Shin (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure

KANG Chun Ee (603) 2297 8675 [email protected] • Consumer

Ivan YAP (603) 2297 8612 [email protected] • Automotive

LEE Cheng HooiRegional Chartist (603) 2297 8694 [email protected]

Tee SzeChiahHead of Retail Research


HONG KONG / CHINA

Howard WONGHead of Research (852) 2268 0648 [email protected] • Oil & Gas - Regional

Alexander LATZER (852) 2268 0647 [email protected] • Metals & Mining - Regional

Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer

Karen KWAN (852) 2268 0640 [email protected] • Property & REITs

Osbert TANG, CFA (852) 21 5096 8370 [email protected] • Transport & Industrials

Philip TSE, CFA FRM (852) 2268 0643 [email protected] • Property & REITs

Ricky WK NG, CFA (852) 2268 0689 [email protected] • Utilities & Renewable Energy

Simon QIAN, CFA (852) 2268 0634 [email protected] • Telecom & Internet

Steven ST CHAN (852) 2268 0645 [email protected] • Banking & Financials

Warren LAU (852) 2268 0644 [email protected] • Technology – Regional

William YANG (852) 2268 0675 [email protected] • Technology – Regional

INDIA

Jigar SHAH Head of Research

(91) 22 6623 2601

[email protected]

• Oil & Gas • Automobile • Cement

Anubhav GUPTA

(91) 22 6623 2605

[email protected]

• Metal & Mining • Capital Goods • Property

Urmil SHAH

(91) 22 6623 2606 [email protected]

• Technology • Media

SINGAPORE

NG Wee SiangHead of Research (65) 6432 1467 [email protected] • Banking & Finance

Gregory YAP (65) 6432 1450 [email protected]

• SMID Caps – Regional • Technology & Manufacturing • Telcos

Wilson LIEW (65) 6432 1454 [email protected] • Property Developers

ONGKian Lin (65) 6432 1470 [email protected] • S-REITs

James KOH (65) 6432 1431 [email protected] • Consumer - Regional

YEAKCheeKeong, CFA (65) 6432 1460 [email protected] • Offshore & Marine

Derrick HENG (65) 6432 1446 [email protected] • Transport (Land, Shipping & Aviation)

WEI Bin (65) 6432 1455 [email protected] • Commodity • Logistics • S-chips

John CHEONG (65) 6432 1461 [email protected] • Small &Mid Caps• Healthcare

INDONESIA

WiliantoIEHead of Research (62) 21 2557 1125 [email protected] • Strategy

RahmiMARINA (62) 21 2557 1128 [email protected] • Banking & Finance

AurelliaSETIABUDI (62) 21 2953 0785 [email protected] • Property

Anthony YUNUS (62) 21 2557 1136 [email protected] • Consumer • Poultry

IsnaputraISKANDAR (62) 21 2557 1129 [email protected] • Metals & Mining • Cement

PanduANUGRAH (62) 21 2557 1137 [email protected] • Infrastructure • Construction • Transport

JanniASMAN (62) 21 2953 0784 [email protected] • Cigarette • Healthcare • Retail

PHILIPPINES

Luz LORENZOHead of Research (63) 2 849 8836 [email protected] • Strategy

Laura DY-LIACCO (63) 2 849 8840 [email protected] • Utilities • Conglomerates • Telcos

Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement

Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics

Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction

Ramon ADVIENTO (63) 2 849 8845 [email protected] • Mining

THAILAND

Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Consumer / Materials

JesadaTECHAHUSDIN, CFA (66) 2658 6300 ext 1394 [email protected] • Financial Services

KittisornPRUITIPAT, CFA, FRM (66) 2658 6300 ext 1395 [email protected] • Real Estate

SittichaiDUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector

SukitUDOMSIRIKULHead of Retail Research (66) 2658 6300 ext 5090 [email protected]

MayureeCHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy

PadonVANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy

Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel

SuttatipPEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce

SutthichaiKUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem

TermpornTANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property

WoraphonWIROONSRI (66) 2658 6300 ext 1560

[email protected] • Banking & Finance

JaroonpanWATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap

Chatchai JINDARAT (66) 2658 6300 ext 1401 [email protected] • Electronics

VIETNAM

LE Hong Lien, ACCA Head of Institutional Research (84) 844 55 58 88 x 8181 [email protected] • Strategy • Consumer • Diversified • Utilities

THAI QuangTrung, CFA, Deputy Manager, Institutional Research (84) 844 55 58 88 x 8180 [email protected] • Real Estate • Construction • Materials

TRUONG Thanh Hang (84) 844 55 58 88 x 8085 [email protected] • Consumer

Le Nguyen NhatChuyen (84) 844 55 58 88 x 8082 [email protected] • Oil & Gas NGUYEN ThiNganTuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking

NGUYEN TrungHoa, Dy Head of Retail Research (84) 8 44 555 888 x 8088 [email protected] • Macro • Steel • Real estate

TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction

TRUONG QuangBinh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas

PHAM NhatBich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery

NGUYEN Thi Sony TraMi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical • Food & Beverage



APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS

This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.

The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.

This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.

This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.

This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.

Malaysia

Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.

Singapore

This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.

Thailand

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.

Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.

US

This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations.

UK

This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.



Disclosure of Interest

Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.

Singapore: As of 8 January 2014, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.

Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.

Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.

As of 8 January 2014, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.

MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Reminder

Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.

No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Definition of Ratings

Maybank Kim Eng Research uses the following rating system

BUY Return is expected to be above 10% in the next 12 months (excluding dividends)

HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends)

SELL Return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

DISCLOSURES

Legal Entities Disclosures

Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines:Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.



Malaysia Maybank Investment Bank Berhad

(A Participating Organisation of

Bursa Malaysia Securities Berhad)

33rd Floor, MenaraMaybank,

100 JalanTun Perak,

50050 Kuala Lumpur

Tel: (603) 2059 1888;

Fax: (603) 2078 4194

Singapore Maybank Kim Eng Securities Pte Ltd

Maybank Kim Eng Research Pte Ltd

9 Temasek Boulevard

#39-00 Suntec Tower 2

Singapore 038989

Tel: (65) 6336 9090

Fax: (65) 6339 6003

London Maybank Kim Eng Securities

(London) Ltd

6/F, 20 St. Dunstan’s Hill

London EC3R 8HY, UK

Tel: (44) 20 7621 9298

Dealers’ Tel: (44) 20 7626 2828

Fax: (44) 20 7283 6674

New York Maybank Kim Eng Securities USA

Inc

777 Third Avenue, 21st Floor

New York, NY 10017, U.S.A.

Tel: (212) 688 8886

Fax: (212) 688 3500

Stockbroking Business:

Level 8, Tower C, DataranMaybank,

No.1, JalanMaarof

59000 Kuala Lumpur

Tel: (603) 2297 8888

Fax: (603) 2282 5136

Hong Kong Kim Eng Securities (HK) Ltd

Level 30,

Three Pacific Place,

1 Queen’s Road East,

Hong Kong

Tel: (852) 2268 0800

Fax: (852) 2877 0104

Indonesia PT Maybank Kim Eng Securities

Plaza Bapindo

Citibank Tower 17th Floor

JlJend. SudirmanKav. 54-55

Jakarta 12190, Indonesia

Tel: (62) 21 2557 1188

Fax: (62) 21 2557 1189

India Kim Eng Securities India Pvt Ltd

2nd Floor, The International 16,

Maharishi Karve Road,

Churchgate Station,

Mumbai City - 400 020, India

Tel: (91).22.6623.2600

Fax: (91).22.6623.2604

Philippines Maybank ATR Kim Eng Securities Inc.

17/F, Tower One & Exchange Plaza

Ayala Triangle, Ayala Avenue

Makati City, Philippines 1200

Tel: (63) 2 849 8888

Fax: (63) 2 848 5738

Thailand Maybank Kim Eng Securities

(Thailand) Public Company Limited

999/9 The Offices at Central World,

20th - 21st Floor,

Rama 1 Road Pathumwan,

Bangkok 10330, Thailand

Tel: (66) 2 658 6817 (sales)

Tel: (66) 2 658 6801 (research)

Vietnam Maybank Kim Eng Securities Limited

4A-15+16 Floor VincomCenter Dong

Khoi, 72 Le Thanh Ton St. District 1

Ho Chi Minh City, Vietnam

Tel : (84) 844 555 888

Fax : (84) 8 38 271 030

Saudi Arabia In association with

Anfaal Capital

Villa 47, Tujjar Jeddah

Prince Mohammed bin Abdulaziz

Street P.O. Box 126575

Jeddah 21352

Tel: (966) 2 6068686

Fax: (966) 26068787

South Asia Sales Trading Kevin FOY

[email protected]

Tel: (65) 6336-5157

US Toll Free: 1-866-406-7447

North Asia Sales Trading Alex TSUN

[email protected]

Tel: (852) 2268 0228

US Toll Free: 1 877 837 7635

www.maybank-ke.com | www.maybank-keresearch.com

my fixed income outlook 2015 flat curve, tread cautiously

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