‘LO­CAL BOND MART AT­TRAC­TIVE’

Many big in­fra­struc­ture projects have been fi­nanced through is­suance of bonds, says eco­nomics pro­fes­sor

New Straits Times - - Business -

KUALA LUMPUR

THE lo­cal bond mar­ket’s sus­tained growth is a re­flec­tion of the at­trac­tive­ness of Malaysia’s debt cap­i­tal mar­ket in meet­ing the fi­nanc­ing needs of both the gov­ern­ment and the pri­vate sec­tor.

Dr Yeah Kim Leng, pro­fes­sor of eco­nomics at Sun­way Univer­sity Busi­ness School, said of par­tic­u­lar im­por­tance to the pri­vate sec­tor was the con­tin­u­ing ac­cess to the do­mes­tic bond mar­ket as a re­li­able source for large scale, long-term and low-cost fund­ing.

Bank Ne­gara Malaysia re­cently said the bond mar­ket had ex­panded to RM1.2 tril­lion, or 90 per cent, of gross do­mes­tic prod­uct (GDP) as at end of last year.

The mar­ket grew at an av­er­age 10.5 per cent an­nu­ally since 2006.

The gov­ern­ment’s bond seg­ment in­creased 10.1 per cent per year to RM634 bil­lion, while cor­po­rate bonds in­clud­ing sukuk (Is­lamic bonds) ex­panded 10.9 per cent per year to RM534 bil­lion.

The dy­namism of the do­mes­tic bond mar­ket is re­flected in the steady stream of bond is­suances, sta­ble yields and ac­tive sec­ondary mar­ket ac­tiv­i­ties, said Yeah, when com­ment­ing on Bank Ne­gara’s lat­est num­bers.

“Not sur­pris­ing there­fore, many large in­fra­struc­ture projects have been fi­nanced through the is­suance of bonds. This avail­abil­ity of bond fi­nanc­ing sources has en­abled the con­struc­tion sec­tor to sus­tain an av­er­age growth of 7.6 per cent a year, above the av­er­age an­nual GDP growth of 4.8 per cent over the same pe­riod.”

He said the bond mar­ket is re­silient to non-res­i­dent out­flow.

“The re­ver­sal of cap­i­tal flows in the Malaysian bond mar­ket was ev­i­dent in the de­clin­ing share of non-res­i­dent hold­ings of gov­ern­ment se­cu­ri­ties which stood at 29.6 per cent as at end Jan­uary.”

Yeah added that based on Bank Ne­gara’s lat­est data, the non-res­i­dents’ share peaked at 34.7 per cent last Novem­ber.

“The sell down by non-res­i­dents picked up following Don­ald Trump’s elec­tion vic­tory and Bank Ne­gara’s ac­tions to sta­bilise the ring­git, in­clud­ing mea­sures to curb the off-shore non­de­liv­er­able for­ward mar­ket,” he said.

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