CIMB CIMB

Gateway to Southeast Asia Gateway to Southeast Asia

CIMB P t ti t E C f CIMB Presentation at Euromoney Conference
Beijing, 17 November 2010
Investing in Southeast Asian Quasi Sovereign Corporate Debt and Investing in Southeast Asian Quasi Sovereign, Corporate Debt and
Sukuk Markets
Southeast Asia Bond Markets An Overview Southeast Asia Bond Markets An Overview
140
160
137
160 September 2010
40
60
80
100
120
100
92
64
97
12
38
70
U
S
D

B
i
l
l
i
o
n
s
0
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Malaysia Indonesia Thailand Singapore Philippines
12
9
Government Bonds Corporate Bonds GovernmentBonds CorporateBonds
As at end September 2010, the size of bond markets were as follows:
Outstanding Bonds
Government
(USD Billion)
Corporate
(USD Billion)
Total
(USD Billion) ( ) ( ) ( )
Southeast Asia
(Malaysia, Indonesia, Thailand,
Singapore and Philippines combined)
553 226 779
China 2,377 614 2,991
4
Size of AAA and AA Rated (Local) Corporate Bonds Size of AAA and AA Rated (Local) Corporate Bonds
MALAYSIA (Approx. USD65.75 Billion) INDONESIA (Approx. USD6.33 Billion)
SINGAPORE* (Approx. USD44.57 Billion) THAILAND (Approx. USD15.52 Billion)
Source: Bloomberg, 31October 2010 and based on exchange rate RM3.09:USD1.00 Source: Bloomberg, 31 October 2010 and based on exchange rate IDR8,908:USD1.00
Source: Bloomberg, 31 October 2010 and based on exchange rate THB2,965:USD1.00
Source: Bloomberg, 31 October 2010 and based on exchange rate SGD1.29:USD1.00
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g, g ,
g g
*Total Corporate Bonds issued for all rating scales. Note that most of the issuers are non-rated.
Legal Framework Legal Framework
Malaysia Indonesia Singapore Thailand
Regulator
Securities
Commission
Malaysia (SC)
Badan Pengawas
Pasar Modal dan
Lembaga
Keuangan
(Bapepam-LK)
Monetary Authority
of Singapore
(MAS)
Securities and
Exchange
Commission
Bonds
Regulations
Securities
Commission Act
1993, replaced by
Capital Markets and
Services Act 2007
Undang-Undang
Republik Indonesia
Nomor 8 Tahun
1995
Securities & Futures
Act (Cap. 289)
Securities and
Exchange Act
B.E.2535
(A.D.1992)
Services Act 2007
Is there trust
law?
Yes No Yes Yes
Are there
Yes
Companies Act
Yes
Yes
Companies Act
Yes
Bankruptcy Act
Are there
bankruptcy &
liquidation laws?
Companies Act
1965
Bankruptcy Act
1967
Undang-undang
Nomor 4 tahun
1998 (Bankruptcy)
Companies Act
(Cap. 50)
Bankruptcy Act
(Cap. 20)
B.E.2483 (A.D.1940)
Amended up to
Bankruptcy Act No.7
B.E.2547 (A.D.2004)
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Rating Requirement & Rating Agencies Rating Requirement & Rating Agencies
Malaysia Indonesia Singapore Thailand
Compulsory Compulsory
Rating
Requirement
Yes Yes Not required Yes
RAM Rating PT Pemeringkat
Local Rating
Agencies
Services Berhad
(RAM)
Malaysian
Rating
Efek Indonesia
(Pefindo)
PT Fitch Ratings
Indonesia (Fitch
Not available
TRIS Rating Co.
Ltd (TRIS)
Fitch (Thailand)
Rating
Corporation
Berhad (MARC)
Indonesia ( Fitch
Indonesia)
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Average Annual Rating Migration Malaysia (1992 2009) - RAM Average Annual Rating Migration Malaysia (1992 2009) - RAM
Rating
(From/To)
(%)
AAA AA A BBB BB B CCC D
iAAA 98.39 1.61 0.00 0.00 0.00 0.00 0.00 0.00
AA 1.62 94.65 2.43 0.97 0.16 0.00 0.16 0.00
A 0.13 4.05 87.99 6.45 0.25 0.25 0.00 0.88
BBB 0.20 0.61 5.73 79.96 9.82 1.23 1.02 1.43
BB 0.00 0.00 0.51 7.69 70.26 7.69 3.59 10.26
B 0.00 0.00 0.00 0.00 6.25 84.38 5.21 4.17
C 0.00 0.00 3.45 0.00 0.00 0.00 58.62 37.93
Source: RAM, April 2010
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Average Annual Rating Migration Indonesia (1996 2009) - Pefindo Average Annual Rating Migration Indonesia (1996 2009) - Pefindo
Rating
(From/To)
(%)
idAAA idAA idA idBBB idBB idB idCCC idD NR
iidAAA 73.33 0.00 0.00 0.00 0.00 0.00 0.00 0.00 26.67
idAA 4.49 77.53 5.62 0.00 1.12 0.00 0.00 1.12 10.11
idA 0.28 6.41 73.26 1.95 0.56 0.00 0.00 2.51 15.04
idBBB 0.00 0.54 8.13 48.78 3.52 0.81 1.63 6.50 30.08
idBB 0.00 0.00 0.00 6.60 12.26 2.83 2.83 16.98 58.49
idBBB 0.00 0.00 0.00 4.35 13.04 39.13 4.35 21.74 17.39
idCCC 0.00 0.00 0.00 7.69 0.00 7.69 0.00 0.00 15.38
Source: Pefindo, April 2010
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Average Annual Rating Migration Thailand (2002 2009) - Fitch Average Annual Rating Migration Thailand (2002 2009) - Fitch
Rating
(From/To)
(%)
AAA(tha) AA(tha) A(tha) BBB(tha) BB(tha) B(tha)
CCC to
C(tha)
D(tha) Total
AAA(tha) 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00
AA(tha) 3.92 96.08 0.00 0.00 0.00 0.00 0.00 0.00 100.00
A(tha) 0.00 2.30 94.25 3.45 0.00 0.00 0.00 0.00 100.00
BBB(tha) 0.00 0.00 10.91 87.27 1.82 0.00 0.00 0.00 100.00
BB(tha) 0.00 0.00 0.00 33.33 66.67 0.00 0.00 0.00 100.00
B(tha) 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 100.00
CCC to
C(tha)
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Source: Fitch Thailand, July 2010
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Average Annual Rating Migration Asia* (1993 2006) Standard & Poors Average Annual Rating Migration Asia (1993 2006) Standard & Poors
Rating
(From/To
)
(%)
AAA AA A BBB BB B CCC/CC D N.R.** Total
(%)
AAA 87.50 12.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00
AA 1.56 84.38 12.50 0.00 0.00 0.00 0.00 0.00 0.00 100.00 AA 1.56 84.38 12.50 0.00 0.00 0.00 0.00 0.00 0.00 100.00
A 0.00 2.37 89.05 5.62 0.30 0.88 0.00 0.00 1.78 100.00
BBB 0.00 0.00 7.20 79.00 6.20 1.60 0.20 0.40 5.40 100.00
BB 0.00 0.00 0.00 5.30 76.92 2.08 1.44 0.64 13.62 100.00
B 0.00 0.00 0.24 0.24 10.14 68.16 2.59 1.89 16.74 100.00
CCC/CC 0.00 0.00 0.00 0.00 0.00 14.93 53.73 11.94 19.40 100.00
Note:
* Excludes Japan
** N.R. = not rated after rating withdrawn N.R. not rated after rating withdrawn
Source: Standard & Poors, February 2007
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In Conclusion In Conclusion
Local Currency Corporate Bonds in South East Asia are
sizable
with well tested legal framework
&of high credit quality & of high credit quality
Source of Credit Information Source of Credit Information
Malaysia Indonesia Singapore Thailand
Are information
memorandum
or offering
circulars
available?
Yes Yes Yes Yes
available?
Are there credit
research by
investment
b k ?
Yes Yes Yes Yes
banks?
Website
Securities
Commission
RAM
Pefindo
S&P
Moodys
The Thai Bond
Market Association
Securities and
Exchange
sources
RAM
MARC
Fitch Indonesia Fitch
Exchange
Commission
TRIS and Fitch
Thailand
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Taxation on Non-Resident Investors
on Local Currencies Government and Corporate Bonds on Local Currencies Government and Corporate Bonds
Malaysia Indonesia Singapore Thailand
Withholding tax ( WHT )
on Interest Income from
Government Bonds
Exempted Yes Exempted Yes
Exempted if derived from Exempted if derived
WHT on Interest Income
from Corporate Bonds
Exempted if derived from
bonds approved by
Securities Commission
Yes
Exempted if derived
from Qualifying Debt
Securities
Yes
15% 20% 15% 15%
Based on the Double Taxation Agreement (DTA) between China and Malaysia Indonesia
WHT rate on interest
income (if applicable)
Based on the Double Taxation Agreement ( DTA ) between China and Malaysia, Indonesia,
Singapore and Thailand respectively:
The WHT rate for interest would be reduced to a maximum 10%. However, this would not
apply if the non-resident has a permanent establishment in the respective countries.
Capital Gains Tax Not subject to tax Yes, 20% * Not subject to tax Yes, 15%
* Pursuant to China-Indonesia DTA, the capital gain tax is only taxable in country where the investor is resident
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5-year CNY/MYR, CNY/IDR, CNY/SGD, CNY/THB Index 5 year CNY/MYR, CNY/IDR, CNY/SGD, CNY/THB Index
CNY/MYR CNY/IDR CNY/SGD CNY/THB
110.00
120.00
130.00
80 00
90.00
100.00
60.00
70.00
80.00
50.00
J an-05 J ul-05 J an-06 J ul-06 J an-07 J ul-07 J an-08 J ul-08 J an-09 J ul-09 J an-10 J ul-10
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Sukuk/Islamic Bonds Sukuk/Islamic Bonds
C i l S k k
Sukuk are Syariah Compliant Bonds
No Interest
Underlying
Conventional Sukuk
Underlying
Asset/business
is Syariah
compliant
Bondholders Sukuk Holders
The difference is
in the way
indebtedness is
created
Interest Rental/Profit
All the rights of
the investors are
the same
Borrowed
Money
Asset/Business
Sukuk/Islamic Bonds Sukuk/Islamic Bonds
Stage of Development
Well developed RM Islamic Sukuk markets with conducive tax, legal and regulatory
Malaysia
p , g g y
framework coupledwith stronginvestor support fromconventional andIslamic investors.
As at 31 October 2010, there were approximately RM175 billion (USD56.63 billion)
outstanding Sukuk in the market. This represents 57.5% of total RM bonds outstanding in
the Malaysiandebt capital market (RM310.37billion, or approximatelyUSD100.44billion).
Indonesia
Developing Islamic Sukuk market with Sukuk law for Indonesian Sovereign in place.
Government approved profit sharing concept (Mudharabah) and other ongoing initiatives to
spur Corporate Sukuk market development .
As at 31 October 2010, there were 10 outstanding sovereign Sukuk amounting to g g g
approximately IDR25.335 trillion (USD2.84 billion) and 23 outstanding corporate Sukuk
issues amountingto approximatelyIDR6.021trillion (USD0.68billion).
Developing Islamic Sukuk market whereby MAS adopts pragmatic approach to ensure level
playing field for both Islamic and conventional financing from regulatory and tax
perspectives
Singapore
FromJ anuary 2009 till to date, there are approximately SGD1,829.0 million Sukuk issued
by, amongst others, Islamic Development Bank, City Developments Limited, Khazanah (via
Danga Capital Berhad) and Majlis Ugama IslamSingapore (a Statutory Board)
Thailand Sukuk framework currently developed byauthorities Thailand Sukuk framework currently developed byauthorities
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Analysis of the Global Sukuk Market
New Global Sukuk Issues by Country: Jan to Oct 2010
Analysis of the Global Sukuk Market
35
New Global Sukuk Issues by Value
Others
9.3% Singapore
0.6%
Saudi
Arabia
9.8%
Bahrain
3.5%
31.6
25
30
35
U
S
D

B
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l
l
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n
s
Malaysia
UAE
17.8%
Indonesia
4.1%
18.0
15.7
21.5
13.8
15
20
y
54.9%
Outstanding Global Sukuk as at 31 October 2010
8.7
5
10
Saudi
Arabia
13 1%
Others
7.2%
Bahrain
2.5%
Indonesia
1.6%
Singapore
0.1%
0
2005 2006 2007 2008 2009 2010 Malaysia
54.4%
UAE
21.1%
13.1%
Source: Bloomberg
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