Sales of Malaysian ringgit- denominated Islamic bonds are poised to beat
the 2007 record as companies tap into lower borrowing costs to fund
government infrastructure projects.
Offerings of the debt rose 76 per cent to RM32.9 billion (US$10.4 billion) this year from the same period in 2010, approaching the all-time high of RM38.7 billion, data compiled by Bloomberg show. Ringgit government bonds yielded 373 basis points less than the average yield on local-currency notes in developing nations on Sept. 22, the biggest gap since July 29, according to JPMorgan’s GBI-EM indexes. (source)
Companies are turning to sukuk as Prime Minister Najib Razak’s government invites them to take part in a US$444 billion development plan to build roads, rail links and power plants. Ringgit debt yields have risen eight basis points this month to Sept 27, more than three times less than the 26 basis-point increase for domestic emerging-market bonds, JPMorgan data show.
“There’s no shortage of demand in Malaysia as the market is still relatively flush with ringgit liquidity,” Hang Tuah Amin Tajudin, vice president at OCBC Al-Amin Bank, a unit of Singapore’s Oversea Chinese Banking Corp, said in an interview yesterday. “There’s a good chance sukuk sales this year will reach RM40 billion given the pipeline.”
Offerings of the debt rose 76 per cent to RM32.9 billion (US$10.4 billion) this year from the same period in 2010, approaching the all-time high of RM38.7 billion, data compiled by Bloomberg show. Ringgit government bonds yielded 373 basis points less than the average yield on local-currency notes in developing nations on Sept. 22, the biggest gap since July 29, according to JPMorgan’s GBI-EM indexes. (source)
Companies are turning to sukuk as Prime Minister Najib Razak’s government invites them to take part in a US$444 billion development plan to build roads, rail links and power plants. Ringgit debt yields have risen eight basis points this month to Sept 27, more than three times less than the 26 basis-point increase for domestic emerging-market bonds, JPMorgan data show.
“There’s no shortage of demand in Malaysia as the market is still relatively flush with ringgit liquidity,” Hang Tuah Amin Tajudin, vice president at OCBC Al-Amin Bank, a unit of Singapore’s Oversea Chinese Banking Corp, said in an interview yesterday. “There’s a good chance sukuk sales this year will reach RM40 billion given the pipeline.”
Kuala Lumpur-based power producer Tenaga Nasional Bhd. plans to sell 5
billion ringgit of notes next month, while Dubai-based mortgage firm
Tamweel PJSC said it may issue at least US$300 million either in ringgit
or dollars this year.
Pressing Ahead
Tenaga Nasional is
pressing ahead with its sale of bonds that comply with Islam’s ban on
interest, Mohamed Rafique Merican, the company’s chief financial
officer, said yesterday, even though the European sovereign debt crisis
and the faltering U.S. economy is boosting concern that a global
recession is looming.
Stocks in the U.S. and Europe dropped
yesterday amid growing concern European leaders are divided over how to
handle Greece’s debt crisis. The European Commission is resisting a push
to impose bigger writedowns on banks’ holdings of Greek debt, according
to an official who declined to be identified because the deliberations
are private.
Varun Sood, acting chief executive officer at
Tamweel, said on Sept 27 that there is demand for Islamic bonds and the
company has hired three banks to manage its issue.
MidCiti
Resources Sdn Bhd, a Malaysian property company, plans to raise as much
as RM880 million to refinance loans and for working capital, the company
said in a stock exchange filing on Sept 15. Emery Oleochemicals Group, a
chemicals producer, plans to sell RM480 million of sukuk in the fourth
quarter, Kongkrapan Intarajang, the company’s chief executive officer,
said in an e-mail on Aug. 18.
‘Recognized Structure’
Companies
from the Persian Gulf are issuing sukuk in Malaysia as it pioneered
Islamic finance 30 years ago and has the world’s biggest market for
Shariah-compliant debt. The country is rated A- by Standard &
Poor’s, the fourth-lowest investment grade. Malaysia is four levels
above nearby Indonesia with its junk ranking of BB+, and four steps
below Abu Dhabi at AA. Dubai doesn’t have a credit rating.
Malaysia
has attracted companies such as Jeddah, Saudi Arabia-based multilateral
lender Islamic Development Bank and General Electric Capital Corp. in
the U.S. Both companies’ issues are listed on the Bloomberg Malaysian
Sukuk Ex-MYR Index, which measures 10 foreign-currency Islamic bonds
sold by corporates and governments in the nation. The gauge rose to
103.378 on Sept. 27 and is up 4.9 per cent this year.
Investor Confidence
“Malaysian
sukuk have an internationally recognized structure that gives investors
confidence,” Chan Cheh Shin, who oversees $3 billion as chief
investment officer at Kuala Lumpur- based Asian Islamic Investment
Management Bhd, said in an interview yesterday. “The rise in yields on
Malaysian sukuk was also less volatile than those in other emerging
countries.”
The Southeast Asian nation’s 10-year infrastructure
plan may draw $10 billion in foreign investment this year, Mustapa
Mohamed, the international trade and industry minister, said on July 27.
Gulf
Investment Corp., the investment company owned by the six-member states
of the Gulf Cooperation Council and based in Kuwait, sold RM1.35
billion of Islamic debt in two portions in February and August this
year.
Global sales of sukuk, which pay returns from assets that
comply with Islam’s ban on interest, rose to US$17.6 billion this year
from US$10.9 billion in the same period of 2010, according to data
compiled by Bloomberg.
Better Than EM
Shariah-compliant
notes are outperforming debt in developing nations, with a return of 5.8
per cent in 2011, according to the HSBC/NASDAQ Dubai US Dollar Sukuk
Index. Emerging-market bonds gained 3.1 per cent, JPMorgan Chase &
Co .’s EMBI Global Index shows.
The difference between the
average yield for sukuk and the London interbank offered rate narrowed
eight basis points, or 0.08 percentage point, to 274 on Sept. 27 and is
35 basis points higher than at the end of last month, according to the
HSBC/NASDAQ Dubai US Dollar Sukuk Index. Average yields dropped two
basis points to 3.87 per cent and are up 33 basis points from Aug 31. -
Bloomberg
“Most Malaysian companies are issuing bonds because
they need funds to refinance loans or for working capital,” Lum Choong
Kuan, Kuala Lumpur-based head of fixed-income research at CIMB
Investment Bank Bhd., a unit of Malaysia’s second-biggest lender, said
in an interview yesterday.
Demand from investors at a government
sale of five-year Islamic bonds on Sept. 14 exceeded supply by 2.84
times, compared with 1.91 times on similar-maturity securities sold in
May, according to Bank Negara Malaysia’s website. The Treasury has sold
26 billion ringgit of sukuk in 2011, up from 18.5 billion a year
earlier, central bank data show.
‘Well-Insulated’
Malaysian
lender AmIslamic Bank Bhd. and Kuala Lumpur Kepong Bhd., the nation’s
third-biggest listed palm oil producer, sold Islamic bonds this week.
AmIslamic
Bank, a unit of Malaysia’s sixth-largest banking group, sold 600
million ringgit of 10-year notes on Sept. 27 at a yield of 4.4 percent.
Kuala Lumpur Kepong sold 300 million ringgit at 3.88 percent on the same
day.
The Bloomberg-AIBIM-Bursa Malaysia Sovereign Shariah Index,
which tracks the most-traded government debt in Malaysia, dropped to
104.7100 on Sept. 27. The gauge is still up 1.7 percent this quarter,
its best three-month performance in data going back to September 2010.
“Our
bond market is well-insulated,” Michael Lau, head of debt markets at
Kuala Lumpur-based Maybank Investment Bank Bhd., the top sukuk
underwriter this year, said in a Sept. 27 interview. “Demand for a good
name is still there as can be seen in recent sales.” - Bloomberg
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