SC to provide framework on sukuk issuance for agro-based industries

The Star, 29 September 2012

THE Securities Commission (SC) will provide a framework on the issuance of AgroSukuk for companies engaged in the agriculture sector to further stimulate the capital and equity market.

Through instruments such as the AgroSukuk, capital can be raised to finance agricultural companies and agro-based industries.

To encourage the issuance of AgroSukuk, the Government proposes that expenses for the issuance of AgroSukuk be given a double deduction for a period of four years effective from year of assessment 2012 to 2015.

“Generally, plantation companies generate very good cashflow. I’m not sure whether they will take it up or not.

“I suspect it is the financial intermediaries which will benefit more,” said Alvin Tai, plantation analyst at OSK Research.

Meanwhile, to encourage retail investors to participate in the capital market, the SC has formulated a framework for retail bond and sukuk issuances to enable investors to acquire stakes in the bond and sukuk markets.

For a start, DanaInfra Nasional Bhd will issue retail bonds worth RM300mil by the end of this year to finance the mass rapid transit development projects.

To encourage companies to issue retail bonds and retail sukuk, additional expenses incurred in the issuance of retail bonds and retail sukuk will be given a double deduction for a period of four years effective from year of assessment 2012 to 2015.

At the same time, individual investors are also given stamp duty exemption on instruments relating to the transactions of retail bonds and retail sukuk.

This retail bonds and sukuk move is generally lauded by industry players especially brokers who said that they would have more products to sell, once this was in place.

“But more details are needed, such as would current brokers need a new licence to sell such products.

“Also, there must be liquidity for retailers to be able to be interested,” Lim Teck Seng, deputy managing director at JF Apex Securities Bhd said.

To ensure an effective and holistic promotion of the Malaysian capital market internationally, the SC will establish a Capital Market Promotion Centre which will adopt an integrated approach across various segments in the capital market and provide consistent initiatives to position Malaysia as a centre of investment and fund raising.

The SC will also introduce the Graduate Representative Programme to increase the supply of professionals to support growth of the capital market. The programme will be implemented in collaboration with the private sector to train 1,000 graduates to meet the needs of the securities and derivatives industry.

Malaysia continues to dominate sukuk issuance accounting for 71% or RM171bil of the total global sukuk issuance in the first seven months of 2012. This is proven by the single largest sukuk issuance by PLUS Bhd worth RM30.6bil.

In addition, the fund management and unit trust industry registered a strong growth in the first half of 2012 with managed assets increasing to RM451.9bil and a net asset value of RM277.8bil.

This year, the domestic equity market registered a strong growth with initial public offerings (IPOs) worth RM17.4bil, a sharp increase of 162% compared with 2011.

Two out of the three largest global IPOs were raised domestically, namely Felda Global Ventures Holdings Bhd with an issuance of RM9.9bil and IHH Healthcare Bhd with RM6.3bil.

Astro Malaysia Holdings Bhd which will be listed next month, is expected to be the largest issuance.

(Web Source: http://thestar.com.my/news/story.asp?file=/2012/9/29/budget/12100015&sec=budget)