Decline In Issuance Of Conventional Bonds And Sukuk Project Code: None Selected
Publication: Bernama Newswire Provider: Pertubuhan Berita Nasional Malaysia (BERNAMA)

July 14, 2009 KUALA LUMPUR, July 13 (Bernama) -- There has been a marked decline in the issuance of both conventional bonds and sukuk (Islamic bonds), according to RAM Rating Services Bhd (RAM Ratings).
The rating house attributed this to the bleak economic landscape, dents in investor confidence and pricing hurdles.

"Although the global economies are expected to stabilise in the coming months, the current performance of the Malaysian bond market is still only modest at best," it said in a statement today.

Despite this, RAM Ratings published ratings of RM22 billion of debt facilities in the first six months this year, capturing about 79 percent of the local bond market.

Of this, only RM6.8 billion has been issued as at end-June, it said.

For the entire market, issuance of ringgit-denominated bonds totalled RM9.6 billion for the same period, about 59 percent lower than the previous corresponding period, according to RAM Ratings.

Similarly, sukuk issuance in first half of this year came up to RM3.9 billion, compared to RM7.3 billion in the same period in 2008, it said.

"The small number of issuance, however, is not indicative of any lack of interest in the bond market, or a dearth in corporates' funding requirements," said RAM Ratings' chief executive officer Liza Mohd Noor.

"The fact that we have close to RM60 billion of rated bonds awaiting issuance amid more conducive conditions testifies to this," she said.

In first half of this year, RAM Ratings' portfolio of issuers was mainly driven by financial institutions, Liza said.

The most recent addition is South Korean issuers Hana Bank, which issued its RM1 billion nominal value multi-currency medium-term notes in June, she said. RAM Ratings said the financial guarantees to be extended by Danajamin Nasional Bhd to investment-grade companies have stirred interest and are expected to help spur bond market activity.

"The setting up of Danajamin is viewed as opening the door to more risk-averse investors, particularly those who have shied away from debt papers with lower than AA ratings," it said.

Apart from papers offered by the larger players, RAM Ratings believes that issuances in the following months will likely be made up of bonds backed by the government or insured by Danajamin.

"These will allow eligible lower-rated issuers to access the bond market for their funding requirements," it said. -- BERNAMA