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»This will provide further flexibility to issuers in fund raisingexercises« OMAR MERICAN
The Star Online> Business
Friday May 8, 2009
Bursa looking at exchange traded bonds
Instrument will enable the structuring of retail offerings by firms and banks
By YAP LENG KUENlengkuen@thestar.com.myPETALING JAYA: Bursa Malaysia is looking into the feasibility of exchange traded bonds (ETBs) to be issued by listedcompanies, private companies and financial institutions, said chief operating officer Omar Merican.“This will enable the structuring of a retail offering that provides further flexibility to issuers in fund-raising exercises, andcomplements the existing retail offerings which range from equity instruments to structured deposits and baskets of assets,”Omar told
StarBiz 
in an email reply. “However, this is still in the preliminary stage of evaluation.’’An ETB is essentially a fixed income instrument listed on the stock exchange for  broader participation by retail investors.It creates a new class of investors for the debt market as the wholesale bond market iscurrently limited to institutional investors due to its transaction size, according toOmar.The difference between the proposed ETB and an exchange traded fund (ETF) is that anETF is essentially a unit trust fund that is listed and traded on a stock exchange.The ETF is designed to provide returns that closely corresponds to the performance of a benchmark index.Units of ETF are traded in the same way as any other security on Bursa.For the ETB to be accessible to retailers, Bond Pricing Agency of Malaysia Sdn BhdCEO Meor Amri Meor Ayob suggested trading lots of RM1,000 (nominal value) viacash trading, for example, through direct debit/credit to designated bank accounts of investors.He also proposed that transaction costs be set at a nominal value based on the number of transactions and not as a percentageof the trade, and that Bursa should also be the central depository institution to maintain the ownership register to further minimise transaction cost.In good times, equities are certainly a draw for most investors.“However, in recent times, investors are reminded of the stability and consistency bond investing offers as instruments suchas bonds, mutual funds and ETFs can potentially outperform stocks over the mid to long term,’’ said HwangDBS InvestmentManagement Bhd chief investment officer David Ng.On a macro perspective, the fixed income asset class as a whole forms a necessary component in an investor’s overall portfolio and allows them to balance the portfolios’ overall performance due to its less volatile nature, especially whenequities are lagging.“However, this does not mean that bonds will improve when the equities market is down. Bottom line, bonds are generally
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