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9th February, 2010
KUALA LUMPUR: The Malaysian debt capital market is set for a rebound in 2010 following an uptick in bond-market activity since the second half of last year and as the economic recovery gains traction this year.
In a statement here yesterday, RAM Rating Services Bhd said the uncertainties weighing down the health of the domestic economy throughout 2009 had, undoubtedly, influenced overall market sentiment.
This, it explained, had been apparent in the pricing hurdles and investors’ diminished risk appetite as the market only favoured debt papers with at least double-A ratings.
RAM rating said the rated value of newly issued private debt securities (PDS) came up to RM61.0 billion last year.
Of this, RM46.9 billion was rated by RAM Ratings, translating into approximately 77 per cent of the rated market.
Nonetheless, it highlighted, actual fresh PDS issuance only amounted to RM20.8 billion, a 31.8 per cent year-on-year drop amid the bleak economic and investment landscape last year.
Looking ahead, however, RAM Ratings expects about RM55 billion – RM60 billion of gross corporate and sukuk issues in 2010.
In contrast to the generally subdued bond market, the growth of the sukuk segment remained resilient in 2009 as sukuk issues made up 68.1 per cent of the total rated PDS, while actual sukuk issuance summed up to RM9.6 billion—some nine per cent higher year-on-year.
As the global economies have begun showing signs of stabilisation, RAM Ratings expects Malaysia’s gross domestic product (GDP) growth to come in at 4.9 per cent in 2010.
This is on the back of increased domestic spending arising from continued government expenditure and private consumption, a gradual recovery in global demand and accommodative monetary as well as fiscal policies.
“From a macroeconomic perspective, the outlook on the Malaysian bond market hinges on the ongoing rollout of the various stimulus packages and allocations under Budget 2010, which we anticipate will necessitate further funding,” said its Chief Executive Officer, Liza Mohd Noor.
“We also expect government-related infrastructure projects and banks’ capital-raising efforts to account for the bulk of the debt capital market’s activity this year,” she added.
According to Liza, conducive fund-raising conditions and a brighter economic outlook, will also encourage corporates to seek additional funding to fuel their growth.
With the normalisation of external conditions, a steadily recovering domestic economy and expectations that Bank Negara Malaysia will keep its benchmark rates intact until the second half of 2010, she believes it is an opportune time for corporates to raise funds, whether for new funding, refinancing or building up their war chests.
Moving into 2010, RAM Ratings has a favourable view of rubber-glove manufacturers and also support services for the oil and gas sector.
“The resilience of the former in 2009 was as expected. We remain upbeat that companies operating predominantly in Malaysia, will enjoy stable demand as Petronas has reaffirmed its upstream commitments up to 2012,” it noted.
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