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MALAYSIA: The cease of
Bank Negara Malaysia (BNM)’s Islamic issuance may have hampered global and
domestic Sukuk volumes but Bond Pricing Agency Malaysia figures show that
Shariah compliant government securities dominated the Malaysian landscape
in the first half of 2015 – a complete reversal from a year ago.
There is no denying that the first six months of the year have seen a
rather dispirited bond and Sukuk market in Malaysia due to persisting
monetary management uncertainties as well as lingering volatility at a
global level. Private debt securities (PDS) tumbled (14.3% year-on-year
fall in issuance value) as corporate issuers remain circumspect of the
environment while quasi-government securities declined by 21.26% in the
first half as compared to the same period in 2014. Government offerings,
however, were up 5.2% to RM62.7 billion (US$16.45 billion) as at the end of
June 2015, with Shariah compliant facilities accounting for 54.4% of total
issuance – a marked improvement from the year before when Islamic securities
were the minority.
And although PDS numbers have shrunk and are anticipated to remain tepid
for the rest of the year (according to RAM Ratings), outstanding Shariah
PDS still outnumber the conventional with month-on-month gross Islamic
issuance leading slightly over its non-Shariah counterpart at RM3.1 billion
(US$814.14 million) in June versus RM2.9 billion (US$761.66 million). The
Sukuk market share is likely to receive a major boost should Tenaga
Nasional’s planned Islamic debt offering of up to RM9.5 billion (US$2.5
billion) – the biggest so far in 2015 – come to market before December.
“As financing cost edges up and the banking sector remains fiercely
competitive, there is no respite in sight in the second half, in line with
our revised projected gross PDS issuance amid a more subdued corporate bond
market this year overall,” commented RAM Ratings. The rating agency also
added in its latest bond report that: “Despite all the noise and
fluctuations in currency and cross-border capital flows, however, foreign
investor sentiment and domestic investment have not fared too badly.”
RAM noted a 1.7% accretion from May to June in holdings of foreign debt
securities with a continuous uptrend in foreign holdings of Malaysian
government securities. On a month-to-month basis, the Islamic markets,
however, saw a decline in foreign participation as foreign investments in
Shariah government securities dropped 10.4% and Islamic BNM facilities
plunged 52.9%. As at the 30th June 2015, the percentage of
foreign holdings (Islamic) to total outstanding bonds stood at 4.2%
(government), 24% (BNM) and 1.6% (PDS and quasi-government securities).
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