Developing deep, vibrant financial markets

THE Malaysian financial markets continued to support the effective and efficient intermediation of funds for economic activity, while further diversifying domestic funding sources which contributes to financial stability.

Last year, the outstanding value of the debt securities market (public and private) expanded further to Rm860.9bil (2010: Rm782.4bil), or 103.8% of gross domestic product.

Financing through the corporate debt securities and sukuk markets increased significantly to account for 58.3% of total outstanding corporate financing as at end-2011 (2010: 46.4%) as more Malaysian businesses tapped the debt securities market for financing.

Sukuk issuances accounted for a higher proportion (2011: 36%; 2010: 32.7%) of total issuance of debt securities driven by stronger demand for more innovative Islamic financial products and services.

During the year, Danajamin Nasional Bhd, which was established as Malaysia’s first financial guarantee insurer to support access by corporations to the bond market, approved Rm7.4bil in guarantees to 25 corporations across a broad range of economic sectors. Of these, Rm2.9bil worth of bonds and sukuk have been issued.

Danajamin has also introduced co-guarantee and syndicated guarantee arrangements with commercial banks under which commercial banks guaranteed the shorter-maturity tranche, while Danajamin guaranteed the longer-maturity tranche.

This has enabled commercial banks to participate in the larger bond issuances with longer-dated maturity structures to meet the needs of the issuers. Four of the 12 guarantee programmes supported during the year involved such structures.

This has contributed to the lengthening of the maturity profile of bonds to a maximum of 20 years, compared with 10 years previously.

The foreign exchange market experienced robust growth during the year.