sukuk

 
 

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.


RAM revises up global sukuk issuance forecast

KUALA LUMPUR: RAM Ratings has revised its global sukuk issuance projection for this year to US$80 billion-US$90 billion (RM331.56 billion-RM373 billion) from US$70 billion-US$90 billion (RM290.12 billion-RM331.56 billion) previously.

It said in a statement today that the upward revision is based on Bank Negara Malaysia’s (BNM) better-than-expected issuance of Islamic securities, the Indonesian government’s commitment and support for the Islamic finance agenda and its role in raising awareness for sustainable and responsible investments (SRI).

As at end of June, global sukuk issuance stood at US$72.7 billion, exceeding the lower range of RAM’s initial projection.

RAM said the new projection was also driven by expectations of the Gulf Cooperation Council’s public sector sukuk issuance providing a sustainable baseline and potentially accounting for a higher proportion of its funding mix.

“Going into the second half of the year, RAM expects Malaysia to retain its pole position as the sukuk market leader in 2019, underpinned by solid support from the government, BNM and the private sector,” said the rating agency.

As at end-June 2019, the gross issuance value of the Malaysian sukuk market had surpassed RAM’s projection of RM100 billion to RM120 billion for the entire year.

Malaysia’s sukuk issuance as at end-June amounted to RM136.9 billion, an increase of 38.3% from RM99 billion recorded in the corresponding period in the previous year.

This was primarily driven by a 61.1% spike in BNM’s issuance of Islamic securities to RM14.5 billion, followed by the corporate sector with RM65.1 billion (+55.5%) and government issues of RM39 billion (+9.9%).


Tabung Haji records stronger financial performance in 1H 2019

KUALA LUMPUR, July 25 ― Lembaga Tabung Haji’s (TH) net profit rose to RM815 million in the first half of 2019 (1H 2019), with an asset surplus of RM1.8 billion. In a statement today, TH attributed the stronger financial performance to its…


Maju’s Bright Focus proposes sukuk restructuring

PETALING JAYA: Maju Holdings Sdn Bhd’s subsidiary Bright Focus Bhd is proposing a sukuk-restructuring exercise to improve the weak structure of the Islamic debt issue.

It involves a sukuk-to-sukuk swap and the issuance of a new sukuk.

Bright Focus, which holds the concession for Maju Expressway (MEX), is also planning to buy back the current sukuk of RM1.225 billion at full nominal or par value.

“Bright Focus Berhad has engaged several international banks to implement the proposed restructuring scheme within the next 90 days, subject to the necessary due diligence by the banks,” said Bright Focus in a statement today.

The sukuk-restructuring exercise comes after the downgrade of Bright Focus’ rating to ‘BB1’ recently. It explained that the downgrade is not reflective of the expressway itself, but the weak structure of the terms of the sukuk.

“The downgrade is due solely to reduced cash reserves due to unscheduled advances to Maju Holdings.”

RAM Ratings had said that the downgrade was premised on the severe impairment in Bright Focus’ debt-servicing metrics following further unanticipated advances by its 96.8%-held subsidiary, Maju Expressway Sdn Bhd (MESB), to the ultimate parent company Maju Holdings Sdn Bhd, in addition to a deterioration in MESB’s projected annual cash flow.

Bright Focus said on a standalone basis, MEX is a performing highway from a perspective of its ability to meet all its obligations under the current sukuk in a timely manner.

“Bright Focus, and by virtue of that Maju Holdings Sdn Bhd, is in a solid financial position to undertake this restructuring programme, which will address the weakness in the current terms of the sukuk. The group is committed to good corporate governance practices and will ensure that sukuk holders’ interests are protected and all obligations are repaid in full in a timely manner.”

Once the proposed restructuring is completed, it expects to see an improvement in its rating for the sukuk.


Wider credit spectrum needed for bond issuance

KUALA LUMPUR: There is a need to widen the credit spectrum to create a more diversified capital market, particularly in bond issuance as most are skewed towards higher credit rating issuances such as AA and AAA-rated.

Danajamin Nasional Bhd CEO Mohamed Nazri Omar said most of the bonds in the market are higher rated such as AAA and AA, mostly comprise of government or large corporates.

“Our market doesn’t have A-rated (bonds) that much. The credit spectrum is so skewed towards AA and AAA now. There’s no diversity in that,” he told reporters at the RAM-SIDC Bond Conference “Fresh Perspectives: Engineering the Future of the Malaysian Bond & Sukuk Market” today.

A-rated bond is still considered investment grade, or bonds that carry low to medium credit risk.

Nazri explained that a developed market should have the ability for issuers with a diverse credit spectrum to issue their bonds/sukuk on a standalone basis. Right now most A-rated corporates are unable to issue without some form of credit enhancement.

He added that the concern of investors is the liquidity or tradeability of A-rated bonds, and not so much on the credit aspect. This means that when there is a need for investors to sell their bonds, can they sell it without incurring huge market loss?

“In terms of issuance, the market is going to develop. There will be more and more issuances because the market is deep enough to help corporate issuances. Liquidity is the issue. We have to talk to regulators, investors, bankers on how to create more market making opportunities.

“Having the market making post issuances will create liquidity, that is if I want to sell, I can sell. The price discovery is also better,” said Nazri.

Describing it as a chicken and egg situation, he said to boost liquidity is to encourage players to buy and sell, but players are also caught in situations concerning their risk appetites.

From the macro perspective, the bond and sukuk market’s ability to provide cost-efficient long-term financing to both the public and private sector makes it integral to the economic development and market resilience.

Securities Commission Malaysia chairman Datuk Syed Zaid Albar said while the bond and sukuk market is deep, the credit profile is relatively narrow, with RM384 billion in papers rated as investment grade as at June 2019.

“This has important policy implications, as the inability of lower-rated issuers to access the bond market may result in an inequitable two speed financial system, where lower rated issuers face constraints in accessing both market based and non-market based financing,“ he said in a special address during the conference.

He added that this may impact the ability of Malaysia’s emerging corporates to scale up and grow into future blue-chip companies.

”This is no doubt a complex and multi-faceted issue, which requires market-based solution so as to avoid potentially adverse long term implications for the capital market at large. For such issuers to come to the market, they must be confident that sufficient demand exists from investors with the necessary risk capabilities and appetite for non-investment grade papers,” said Syed Albar.

Malaysia has one of the deepest bond markets in Asia, with bonds and sukuk outstanding amounting to RM1.49 trillion as at end-June 2019. From a comparison perspective as a percentage of GDP, the Malaysian bond market remains third largest in Asia ex-Japan as at end-2018. As at end-2018, Malaysia accounted for 50.4% of the world’s total sukuk outstanding.

Despite periodic bouts of volatility in the broader market, financing activities in the corporate bond and sukuk market remain relatively resilient, with RM78.4 billion raised in the first six months of 2019. The half-year performance is close to 2018’s full-year tally of RM105.4 billion.


SC: Wider credit spectrum needed

KUALA LUMPUR: There is a need for widening the credit spectrum in terms of accessibility of the capital market.

Securities Commission Malaysia chairman Datuk Syed Zaid Albar said while the bond and sukuk market is deep, the credit profile is relatively narrow, with RM384 billion in papers rated as investment grade as at June 2019.

“This has important policy implications, as the inability of lower-rated issuers to access the bond market may result in an inequitable two speed financial system, where lower rated issuers face constraints in accessing both market based and non-market based financing,“ he said in a special address at the RAM–SIDC Bond Conference “Fresh Perspectives: Engineering the Future of the Malaysian Bond & Sukuk Market” here this morning.

He added that this may impact the ability of Malaysia’s emerging corporates to scale up and grow into future blue-chip companies.

More to come


Cypark plans RM550m sukuk to fund solar projects

PETALING JAYA: Cypark Resources Bhd proposes an Islamic Medium-Term Notes Programme of up to RM550 million to finance three solar photovoltaic power plant projects.

It includes the costs and expenses associated with the design, engineering, procurement, construction and commissioning, ownership, operation and maintenance of the three 30MWAC solar photovoltaic power plant projects.

In addition, proceeds from the sukuk will also be used to finance the profit payments of the sukuk during the construction period and to pre-fund the initial minimum required balance to be deposited into the finance service reserve account.

The sukuk will have a tenure of up to 22 years from the date of first issuance.

Maybank Investment Bank has been appointed as the principal adviser, lead arranger and lead manager for the sukuk programme.


Local bond market up 7.6% in Q1 from year ago

KUALA LUMPUR: Malaysia is among the emerging East Asian economies that saw the local currency bond market continue to expand over the first quarter of 2019 (Q1 2019), despite trade conflicts and moderating global growth, said the Asian Development Bank (ADB).

In its latest issue of the Asia Bond Monitor – June 2019 quarterly report released today, the ADB said the outstanding amount of Malaysia’s local currency bonds totalled US$353 billion (RM1.5 trillion) at end-March 2019, registering a 7.6% year-on-year (y-o-y) growth from Q1 2018.

“Growth stemmed largely from government bonds, particularly central government bonds as their issuance picked up in Q1 2019, while corporate bonds also contributed to the positive growth, but on a smaller scale,“ it added.

The report said Malaysia’s government bond market size stood at US$188 billion at end-March, up 8.7% y-o-y in local currency terms, mainly driven by an expansion of central government bonds.

“The corporate bond market saw a y-o-y growth of 6.4% over the first quarter to US$165 billion,“ it added.

The report also highlighted that Malaysia’s sukuk (Islamic bond) market remained the biggest in emerging East Asia, where 61% of total local currency bonds outstanding, comprised sukuk.

“In Malaysia, 47% of all government bonds are structured following Islamic principles, while 76.9% of corporate bonds are sukuk,“ it said.


Malaysia’s bond market sees continuous expansion in Q1 of this year

KUALA LUMPUR, June 19 ― Malaysia is among the emerging East Asian economies that saw the local currency bond market continue to expand over the first quarter of 2019 (Q1 2019), despite trade conflicts and moderating global growth, said the Asian…


UOB: May foreign outflows at RM6.2 billion as US-China trade war hots up

PETALING JAYA: The escalation of the US-China trade war continued to affect Malaysian equities and debts in May with foreign portfolio outflow totalling RM6.2 billion, according to UOB Global Economics & Markets Research.

This marked the second month of foreign portfolio outflows and was in line with the US$5.7 billion of portfolio outflows from emerging markets during the month.

“The outflows weighed on ringgit sentiment, as the local currency weakened by 1.3% to 4.1900 against the US dollar last month,” it said in a note today.

In May, the renewed risk-off sentiment prompted foreign investors to pare down their Malaysian equities by RM2 billion from the RM1.4 billion outflow in April.

Foreign selling of Malaysian debt securities slid to RM4.2 billion in May from RM9.8 billion in the previous month.

Of the RM4.2 billion bond outflows, Malaysian Government Securities (MGS) made up the biggest portion with an outflow of RM3.8 billion in May, followed by Government Investment Issues (GII) (-RM500 million) and Treasury bills (-RM10 million).

Following that, it trimmed foreign holdings of Malaysian government bonds (MGS & GII) to RM158.0 billion or 20.9% of total outstanding (from RM162.3 billion or 21.9% in April), the lowest since September 2010.

However, overseas investors turned net buyers of private debt securities and private sukuk at RM68.5 million and RM25.8 million respectively in May.

UOB said the sell-off in the equity market continued for the fourth month, bringing the year-to-date outflows to RM4.8 billion.

“As such, foreign shareholdings of Malaysian equities fell to a 17-month low of 23.2% in May (from 23.4% in April).”

The research house said as the outcome of the trade negotiations remains uncertain, some central banks have started to loosen monetary policy.

“We have brought forward our US Fed rate cut expectations to Q3 2019 from Q3 2020 previously. We expect a 25-basis-point (bps) cut in Q3 2019 and another 25 bps in Q4 2019, bringing the upper bound of the Fed funds target rate to 2.0% by end-2019.”

However, UOB expects Bank Negara Malaysia to adopt a wait-and-see stance and keep rates on hold for now, given that is has undertaken a pre-emptive policy rate cut of 25bps to 3% last month.