KUALA LUMPUR (Sept 28): The era of cheap debt is over and rising global bond yields will squeeze earnings, pushing some corporates towards bank loans, BIMB Securities said.
Credit conditions are tightening, hurting firms with unhedged floating rate debts, large refinancing needs and those facing upcoming maturities, the research house said. Capital-intensive and highly leveraged companies face greater earnings risk, amplified by weaker credit quality, the house noted.
“In contrast, we see tech as one of the outlier sectors — where most stocks are actually net cash,” BIMB Securities said in a note.
Unlike true artificial intelligence firms or data centre operators grappling with intensive capital expenditure plans, Malaysian tech stocks is a key rotation sector for the coming era of elevated rates, the house noted.
The US Federal Reserve raised interest rate earlier this month for the first time in three years, sending the yield on the 10-year benchmark Malaysian Government Securities to as high as 4.18% before moderating.
Bond issuances hit record highs in 2025 and corporates have continued to sell more debt this year tapping into the relatively inexpensive markets.
“But this is likely to change as global rates outlook shifts to higher for longer,” BIMB Securities said. The house’s view is for the yield on 10-year government bonds to hold around 3.90% till end of the year but shift towards 4.00% by end-2027.
Among the top 100 firms by market capitalisation, utilities, property, telecommunications, construction, healthcare and real estate investment trusts are the most exposed sectors, BIMB Securities flagged. The house also singled out IOI Properties Group Bhd (KL:IOIPG) for its high floating rate debt exposure.
Genting Bhd (KL:GENTING) and Genting Malaysia Bhd (KL:GENM) were also highlighted as both companies will have to come to the market to refinance substantial debt with sizeable maturities over the next 12 months.
Banking stocks, meanwhile, could benefit from the shift, especially those with strong corporate lending franchises, the research house said.