‘Merger of DFIs will not affect their ratings’

PETALING JAYA: RAM Ratings opined the proposed merger of four development financial institutions (DFIs) will not affect their ratings.

Budget 2020 discloses plans for a two-stage restructuring of DFIs involving Bank Pembangunan Malaysia Bhd (Bank Pembangunan), Danajamin Nasional Bhd (Danajamin), Export-Import Bank of Malaysia Bhd (MEXIM) and the Small & Medium Enterprise Development Bank Malaysia Bhd (SME Bank).

“The proposed exercise is not anticipated to affect the respective AAA/Stable/P1 financial institution ratings of Bank Pembangunan and MEXIM, nor have any impact on Danajamin’s AAA/Stable/P1 insurer financial strength ratings or the ratings of Danajamin-guaranteed issues.”

“The rating assessments for Bank Pembangunan, MEXIM and Danajamin already consider the solid backing of the Government of Malaysia, anchored by each entity’s strategic role in fulfilling the nation’s developmental goals,” the rating agency said in a statement.

The four entities have a combined asset base in excess of RM45 billion and an aggregate guarantee portfolio of about RM6 billion.

RAM said with a larger market impact, the merged DFI’s strategic importance is expected to remain well preserved.

“The DFI’s credit profile and the ratings of debts that may be transferred to it will continue to benefit from a strong likelihood of government support if required.”

It also highlighted that the integration of resources, cultures and systems is critical to a merger of this scale.

“If well implemented, the proposed realignment of the strategic mandates of DFIs will support the nation’s aspirations in a new global digital economic landscape.”

“Bank Pembangunan provides medium to long-term financing to sectors vital to the nation’s socio-economic development, while MEXIM supports and promotes Malaysia’s external trade.”

As the national financial guarantee insurer, Danajamin is tasked with developing the debt capital markets through credit enhancements for bond and sukuk issuances.

Meanwhile, SME Bank nurtures and serves the financing needs of SMEs – a segment which accounts for more than a third of the country’s gross domestic product.

CIMB welcomes the nation’s cashless agenda

PETALING JAYA: CIMB Group Holdings Bhd CEO Tengku Datuk Seri Zafrul Aziz said he welcomed the initiative to advance the nation’s cashless agenda by boosting the use of e-wallets, through the one-time RM30 digital stimulus per qualified Malaysian.

“We laud the sharper focus on advancing the nation’s digital transformation, while also ensuring the benefits will be broad-based, enabling all segments of society to capitalise on the country’s enablement of 5G and other new technologies.”

“This is clear from the tax incentives for knowledge-based foreign investors and encouraging a cashless society, to piloting technology like autonomous vehicles and blockchain,” he said in a statement.

Tengku Zafrul said the enabling policies for SMEs to embrace digital in running their business are well thought out.

“Going digital is crucial for them to capitalise on the potential afforded by the regional and global e-commerce industry.”

He pointed out that an additional boost to SMEs is the government’s incentives on the development and certification of halal businesses, which will feed into the global halal market valued at US$3 trillion.

“In tandem with this objective, we are ever-prepared to assist SMEs to leverage on CIMB Islamic’s Halal Corridor for them to capture part of that fast-growing halal market.”

Tengku Zafrul also welcomed the government’s support for SRI Sukuk, as well as tax incentive for investments in renewable energy technology right through to 2023.

“In particular, the generous 10-year 70% tax exemption for solar leasing technology, together with CIMB’s SME Renewable Energy Financing package will be a definite boost to SMEs’ adoption of renewable energy.”

Overall, he said it is a budget with a good combination of conservative and creative measures that will collectively drive the nation towards a path of long-term sustainable and inclusive growth.

Widad Business Group makes RM3b offer for PLUS concessionaires

PETALING JAYA: Integrated facility management and construction conglomerate Widad Business Group (WBG) has offered to buy the PLUS Expressways Bhd concessionaires for RM3 billion.

In a statement, WBG said its proposal offered two options – the first being a 51% takeover of the concessionaires owned by Khazanah Nasional Bhd for RM1.5 billion cash, where the remaining 49% will be public shareholding owned by the Employees Provident Fund (EPF).

The second option would be a full takeover of the concessionaires owned by Khazanah and EPF for RM3 billion in cash.

Both offers include the waiver of toll compensation worth RM 2.7 billion incurred by the government for the abolishment of tolls in Plaza Batu Tiga and Bukit Kayu Hitam.

The above options also take into account the extension of the highway concessionaires for another 20 years after the conclusion of the concession period.

WBG executive chairman Tan Sri Muhammad Ikmal Opat Abdullah said that in the event that WBG successfully takes over the concessionaires, the group would reduce the current toll charges by 25% to 40%.

“This is in line with the government’s manifesto to reduce the burden of the rakyat, which we fully support. We also intend to help the government by waiving the outstanding compensation of the government to PLUS worth RM338.5 million as of December 31, 2018,” he said in the statement.

He added that WBG would also work to refurbish the involved highway rest stops and implement new artificial intelligence technology to improve highway and traffic management with the additional promise of not making any retrenchment of staff for at least five years after the takeover.

The takeover proposal was submitted to the Prime Minister, the Works Ministry and the Economic Affairs Ministry on October 9.

The acquisition will be funded by WBG’s global strategic partner/investor, coupled with its internal funds and fundraising plan via sukuk medium-term notes and equity issuance.

The highways that are involved in the concessionaires of PLUS Expressways are: PLUS Highway (PLUS), Second Link Expressway (LINKEDUA), Penang Bridge, North South Expressway Central Link (ELITE), Butterworth Kulim Expressway (KLBK), and the Seremban-Port Dickson Highway (SPDH).

Foreign investors buy into M’sian bonds despite FTSE Russell uncertainty

PETALING JAYA: Foreign investors returned to Malaysia’s bond market in September despite market caution ahead of FTSE Russell’s announcement with a net buying of RM900 million.

This compares with RM90 million net selling recorded in August, said UOB Research.

Foreigners have bought RM4.3 billion worth of Malaysian bonds in the first nine months of this year, against net outflows over the last two years whereby RM22.2 billion was sold in January-September 2018 and RM14.5 billion in January-September 2017.

FTSE Russell retained Malaysia in its bond index but still kept Malaysia on the watch list until the next review in March 2020.

“As such, the announcement was neutral as markets refocus on US-China trade talks and the next Federal Open Market Committee (FOMC) meeting on Oct 29-30 which could be a potential trigger for another risk-off episode,” said the research house.

“We reiterate our US dollar/ringgit forecasts of 4.19 by end-2019 and 4.26 by mid-2020,” it added.

In September, most of the buying was concentrated in Malaysian Government Securities (MGS) (RM500 million), treasury bills (RM300 million), private debt securities including private sukuk (RM100 million) and Government Investment Issues (GII) (RM50 million).

Foreign holdings of Malaysian government bonds (MGS & GII) rose RM500 million to RM169.5 billion or 22.1% of total outstanding in September.

In Q3 19, foreigners bought RM6.5 billion worth of bonds but sold RM3.2 billion worth of equities.

Meanwhile, foreign reserves fell US$0.5 billion to US$103 billion as at end-September, which is sufficient to finance 7.6 months of retained imports and is 1.1 times short-term external debt.

The research house said that foreign reserves remains supported by stable current account surplus and sustained foreign direct investments while foreign portfolio outflows ebb.

Year-to-date, foreign reserves rose US$1.6 billion in January-September.

Meanwhile, UOB said foreign selling of equities narrowed to RM600 million in September compared with a net selloff of RM2.6 billion in August.

This brought year-to-date foreign selling of Malaysian equities to RM7.9 billion.

“Foreign portfolio flows into Malaysia’s capital markets turned around to a net inflow of RM3.3 billion in Q3 19, mainly due to higher bond inflows of RM6.5 billion which offset equity outflows of RM3.2 billlion in Q3.

Tabung Haji equity rises by RM1.12b, denies selling stakes in past year

KUALA LUMPUR, Sept 30 — The domestic equity value of pilgrimage fund Lembaga Tabung Haji (TH) has increased from RM6.36 billion at the end of last year to RM7.48 billion, it announced. It said RM1.12 billion increase is due to TH’s investments…

Tabung Haji: Equity investment stays strong at RM7.48b

KUALA LUMPUR, Sept 30 — Lembaga Tabung Haji (TH) says its equity investment has stayed strong with the value of domestic equities increasing by RM1.12 billion to RM7.48 billion as at Sept 27, 2019 from RM6.36 billion at the end of 2018. In a…

Perak Transit to issue RM300m sukuk under first Islamic MTN programme

IPOH: Perak Transit Bhd plans to issue RM300 million sukuk murabahah next month to which United Overseas Bank (Malaysia) Bhd (UOB Malaysia) will be the sole subscriber.

The unrated sukuk murabahah will be the first tranche of Islamic notes to be issued under Perak Transit’s RM500 million 15-year Islamic medium term notes (IMTN) programme, the company’s first IMTN programme.

The proceeds will be used to refinance existing borrowings, to finance the company’s capital expenditure and working capital for existing and new projects.

Perak Transit managing director Datuk Seri Cheong Kong Fitt said the IMTN programme will help the group to reach the next level of growth and to drive cost efficiency through lower financing cost. This enables Perak Transit to deliver more value to its new and existing shareholders and stakeholders.

“With the support of UOB Malaysia, Perak Transit will be able to develop integrated public transportation terminals in other parts of Perak as well as in other regions across Malaysia to provide better transportation infrastructure services to the public at large,” he said in a statement.

UOB Malaysia also acts as the principal adviser, lead arranger, lead manager and facility agent for the entire RM500 million IMTN programme.

UOB Malaysia CEO Wong Kim Choong said UOB Malaysia has a strong track record in the Islamic capital markets, having been involved in a number of significant Islamic capital-raising exercises over the years.

“Islamic financing solutions are integral to the comprehensive suite of products and services we offer to support companies in achieving their strategic goals. UOB Malaysia is proud to be supporting Perak Transit’s first Islamic MTN programme and subscribing to the programme’s first tranche of Islamic notes.”

Moody’s: Sukuk market to expand to around US$130b

KUALA LUMPUR, Aug 28 ― Sukuk issuance is expected to grow by six per cent to around US$130 billion (RM540 billion) this year, said Moody’s Investors Service. In a statement today, it said that although the projection was slightly down from the…

Govt sets up special committee on Islamic finance

PUTRAJAYA, Aug 27 — The Ministry of Finance (MoF) has announced the establishment a Special Committee on Islamic Finance (JKKI) to promote and encourage development of Islamic Finance. The committee, chaired by Deputy Finance Minister Datuk…

Cagamas issues RM825m bonds, sukuk

KUALA LUMPUR: Cagamas Bhd, the National Mortgage Corporation of Malaysia, today announced its combined issuances of conventional medium term notes (CMTN) and Islamic medium term notes (IMTN) totaling RM825 million.

The respective issuances comprised one-year RM800 million CMTN and one-year RM25 million IMTN. Proceeds from the issuances will be used to fund the purchase of housing loans and Islamic housing financing from the financial system.

President and CEO Datuk Chung Chee Leong (pix) said despite expectations for greater external risks arising from heightened volatility within the global markets due to further escalation in trade tension between US and China coupled with the Federal Reserve rate cuts, both CMTN and IMTN were successfully concluded at competitive pricing.

“The initial RM600 million CMTN which was conducted via public offering, received a commendable demand that allowed the company to upsize to RM800 million and tighten its pricing by 5 basis points from the high of the initial price guidance of 3.45% to 3.40%. The RM25 million IMTN were concluded via private placements and priced at the same level as the CMTN,” said Chung in a statement.

He added that the conclusion of the deal brings the company’s year-to-date issuance to RM4.6 billion.

The papers, which will be redeemed at their full nominal value upon maturity, are unsecured obligations of the company, ranking pari passu among themselves and with all other existing unsecured obligations of the company.