Bond market improves on better sentiment http://biz.thestar.com.my/news/story.asp?file=/2009/8/8/business/4480...

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News Saturday August 8, 2009

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Bursa Malaysia Bond market improves on
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Bonus & Dividends KUALA LUMPUR: The bond market, which includes all long and short-term
Financial Results papers, has seen an 8% growth over the last seven months, according to
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Bond Pricing Agency (BPA).
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Based on the net change in amount of bonds outstanding, this almost
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doubled the 4.61% recorded last year, BPA chief executive officer Meor
Amri Meor Ayob told StarBizWeek.

“Sentiment has improved over the last two to three months,’’ he said,
adding that strong names attracted over-subscription.
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“This could have been due to less dovishness in the central bank’s How stress is costing your company millions
rhetoric, front-loaded monetary easing and fiscal stimulus packages
gaining traction.’’ Business Links

In the primary market, new corporate bond issuance rose by 99% to

RM19.3bil for the second quarter compared with the average in the
previous three quarters.

In the secondary market, a daily average volume of RM195mil crossed

hands in the second quarter, a 50% jump from that recorded in the
previous quarter.
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New corporate bond issuance rated by RAM Rating Services Bhd stood
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at RM6.8bil as at end-July, of which RM5.5bil, or 81%, was raised in the Accounts Executive Printing Technician
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“Our second-quarter issuance was 4.3 times larger compared with Department)
issuance in the first quarter,’’ said Liza Mohd Noor, CEO of RAM Ratings. Contract Procurement Officers

RAM Ratings had received a higher number of rating requests and

registered a higher pick-up in mandates for new ratings as early as April
and the momentum has accelerated in the past two months.

Given the sizeable rating mandates in its pipeline, RAM Ratings has
revised its 2009 forecast on gross corporate debt issuance to between
RM30bil and RM35bil from RM25bil.

With government bond yields coming under pressure of high supply, yields
for conventional and Islamic corporate bonds had been increasing over
the same period, said Meor.

“There is less flight to quality in tandem with the return of investors’

confidence,’’ Liza said, adding that the switch to higher-yielding corporate
bonds on a selective basis was also exerting pressure on government
bond yields.

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Bond market improves on better sentiment http://biz.thestar.com.my/news/story.asp?file=/2009/8/8/business/4480...

Wan Murezani said in view of the widening budget deficit, concerns over
supply of government bonds had partly prompted the switch to corporate
bonds for which demand would still be centred on the higher grades.

Against the brighter outlook on corporate bonds, the rally in the equities
market has yielded a 26% gain compared with 3.5% in the bond market
since beginning of this year. “Global and regional equities have rallied
significantly since the beginning of the second quarter,’’ said Wan
Murezani.

“We think this rally is quite fast, considering the fact that global
economies are still in a recessionary mode and the source of the financial
malaise, the US housing market, has not really shown a clear sign of
sustainable recovery.

“Judging from the market movement, it looks like a meaningful recovery by

the second half has been almost fully priced in. The risk that is still
significant, at this juncture, is that of an economic relapse and slower-
than-anticipated recovery.’’

Liza advised companies to consider an optimal capital structure with a

“mixed bag of equity and debt.’’ No doubt the recovery of the equities
market has brought back an important avenue for fund raising, but the
alternatives offered by the fixed-income market has higher propensity for
capital preservation.

The long-term outlook for the Malaysian bond market is bright, according
to Liza.

“Despite the impressive economic achievements thus far, Malaysia as in

the case of other fast-growing Asian countries, still requires ‘old economy’
type of infrastructure investments such as ports, roads, rail, electricity
and water assets. It also requires the ‘new economy’ type of broadband
and telephony infrastructure,” she said.

“We also deem the current penchant for bank loans to be a temporary
occurrence,’’ she added. “With interest rates at historical lows and base
lending rates possibly bottoming out, we anticipate the corporates to
return to the bond market.’’

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