‘SIGNIFICANT FINANCIAL IMPACTS’
Fundraising needs for infrastructure projects will help stimulate capital market development, says HSBC
CHINA’S Belt and Road Initiative, which focuses on physical infrastructure like railway lines, ports and highways, has important financial implications for investors in Malaysia, says HSBC Bank (M) Bhd.
In a statement yesterday, HSBC said the initiative would galvanise infrastructure constructions as far afield as Southeast Asia, Middle East, Africa and Europe.
“There are already many significant Chinese investments in major Malaysian infrastructure projects.
“One such example is the strategic partnership between Melaka and China’s Guangdong province, which aimed to promote various projects that would help develop the state as a strategic port and hub along the Belt and Road route,” it said.
According to Asian Development Bank’s estimates, about RM112 trillion would be needed for infrastructure development in Asia between last year and 2030, as developing nations aimed to raise productivity and deal with growing urbanisation and the impact of climate change, said HSBC.
HSBC Bank said sovereign wealth funds had been deploying more of their assets to global infrastructure investments, especially in Asia.
“The steady return potential of infrastructure investment was also a good fit for Asia’s middleclass investors. The expected growth in capital-raising activity is also good news for the development of some of the smaller markets along the Belt and Road route as many emerging local-currency bond markets have grown rapidly in recent years,” it said.
It said the Malaysian bond and sukuk market also continued to play a major role in supporting economic growth by financing business expansions and infrastructure developments.
It said Malaysian bonds had seen strong demand from local and foreign investors who had been searching for higher-yielding assets after building up significant cash positions over time.
“Foreign interest had resulted in RM6.8 billion and RM10.1 billion of inflows to domestic debt markets in April and May, respectively,” it said.
HSBC Malaysia chief executive officer Mukhtar Hussain said it would require all available sources of capital of the private and public sectors to finance the colossal need for transport, telecommunications and energy infrastructure.
“But it will also generate a broad spectrum of opportunities for local and international investors and stimulate capital markets development in many Asian markets, where bank lending still tends to dominate financing.
“So the Belt and Road fundraising will need to come from the full range of sources, including bridge financing from banks, equity capital from governments, funds and public and private equity markets, and long-term bond issuance from private and public sector institutions,” he said. Bernama