News Coverage
News Coverage
Govt debt market push will boost growth, say players
Malaysian Reserve, 1 October 2012
The focus on debt market instruments in the proposed Budget 2013 is expected to boost the growth of the Malaysian debt market, said capital market players including bankers and fund managers.
The federal budget, unveiled by Prime Minister Datuk Seri Mohd Najib Razak last Friday, proposed that additional expenses incurred in issuing retail bonds and retail sukuk be given a double deduction for four years effective from year of assessment 2012 to 2015.
Individual retail investors will also be given stamp duty exemption on instruments related to retail bonds and retail sukuk.
Additionally, the Securities Commission (SC) will provide a framework for the issuance of AgroSukuk for companies in the agriculture sector.
Expenses for its issuance will be given a double deduction for a period of four years effective from year of assessment 2012 to 2015, Najib said in his Budget 2013 speech at the Parliament last Friday.
Maybank Investment Bank Bhd chief executive officer Datuk Tengku Zafrul Tengku Abd Aziz said the incentives for retail bonds are aimed to widen the investor base for issuers and provide public direct access into the capital markets.
These are expected to help drive and accelerate the growth of the retail bonds/sukuk segment, he told The Malaysian Reserve in an email response.
Bond Pricing Agency Sdn Bhd chief executive officer Meor Amri Meor Ayob said that creating the retail bond is good as there is demand from investors for a different defensive asset class to invest in. “It creates more choices for investors where there are people willing to invest, there is bound to be more companies interested to issue debt papers,” he said.
These incentives are seen as positive in boosting the deal pipeline for financial institutions with regard to the issuance of Islamic securities, according to a MIDF Research Sdn Bhd commentary on the proposed Budget 2013.
Following the SC’s launch of the Malaysian retail bonds and sukuk framework, bonds had been primarily accessible to institutions and high net worth individuals due to the higher board lot size.
As part of the mechanics to retail bond trade, DanaInfra Nasional Bhd will issue retail bonds worth RM300 million by end-2012 to finance mass rapid transit (MRT) development projects. DanaInfra, a Ministry of Finance Inc unit, was formed to help finance the country’s biggest construction project. In July, it issued a RM8 billion government guaranteed sukuk as the first tranche of financing of the MRT project’s Sungai Buloh-Kajang line, estimated to be worth more than RM30 billion.
Tengku Zafrul expected the AgroSukuk framework to encourage more oil palm companies to tap the sukuk market for their capital requirement, adding also that other possible issuers were those in livestock or farming businesses.
“Depending on the scope and details of the framework, glove manufacturers that own rubber plantations such as Top Glove Corp Bhd could also be eligible for the tax deduction and that might encourage them to issue some form of AgroSukuk in the coming years,” he said.
Top Glove recently paid RM22 million for a 95% stake in PT Agro Pratama Sejahtera for some 30,000ha of green field rubber plantation land in Indonesia.
Aberdeen Islamic Asset Management Sdn Bhd chief executive officer Abdul Jalil Abdul Rasheed said the AgroSukuk would not only raise capital for finance companies and agrobased farming but revitalise the country’s capital and equity markets.
“We are confident that it will propel Malaysia’s ambitions to become a major hub for Islamic finance and particularly crossborder sukuk issuance,” he said.
Additionally, on the retail bond announcements, he said apart from giving investors another choice of investment, it would encourage companies to issue retail bonds and sukuk in order to participate in the capital market.