This due to rising yield expectations to account for higher inflation
PETALING JAYA: Bond issuance in the second half year is expected to slow down due to rising yield expectations to account for higher inflation.
“There is a pricing gap between what the issuers are willing to pay and what investors expect from their investments,” said RAM Holdings Bhd chief economist Dr Yeah Kim Leng.
In addition, there are policy risks premium on selected projects, like power, which was earlier slapped with windfall taxes by the Government.
The independent power producers have agreed to renegotiate the power purchase agreements to be exempted from the windfall taxes. The discussions are still ongoing.
The uncertainty over the global economy will hold down appetite to raise funds in the debt market. “Europe and Japan have been hit with economic slowdown while the US has yet to see the (light at the) end of the tunnel,” Yeah said.
Nonetheless, the bond market is still an attractive funding alternative for large-scale, long-term projects. RAM currently has about RM60bil worth of bonds in the pipeline, waiting to be issued when the “time is right.”
“It’s a good indication of the demand,” Yeah said, adding that the sukuk market was growing strongly propelled by government initiatives to attract investors from oil-rich countries in the Middle East.
Based on Bank Negara data, 60% of the outstanding global sukuk were from Malaysia as at end-2007. The Malaysian sukuk market has been increasing at an annual rate of 20%, and accounts for about 56% of the outstanding bonds in the country.
Last year, Malaysia’s new issuance of bonds amounted to RM123bil. In the first half, new issues amounted to about RM62bil, of which RM4.5bil were new Islamic bonds.
Meanwhile, the spike in yield levels has dampened the secondary bond market.
According to Aseambankers Malaysia Bhd head of fixed income research Tan Chee Wee, yield levels spiked up in June when the Government announced the petrol hike, hence raising expectation of higher inflation.
This led to a big sell-down in the bond market, wiping out gains secured in the beginning of the year when yields were falling, he said.
“Yields are still on an upward trend for now but this will depend on whether Bank Negara would reduce or maintain interest rates.
“If the central bank decides to keep monetary policy rate at 3.5%, the yield will eventually come down,” Tan added.
He noted that companies that were previously vying to issue bonds to raise capital had mostly held back as “it’s too expensive now.”
http://thestar.com.my/news/story.asp?file=/2008/9/11/business/1998052&sec=business
PETALING JAYA: Bond issuance in the second half year is expected to slow down due to rising yield expectations to account for higher inflation.
“There is a pricing gap between what the issuers are willing to pay and what investors expect from their investments,” said RAM Holdings Bhd chief economist Dr Yeah Kim Leng.
In addition, there are policy risks premium on selected projects, like power, which was earlier slapped with windfall taxes by the Government.
The independent power producers have agreed to renegotiate the power purchase agreements to be exempted from the windfall taxes. The discussions are still ongoing.
The uncertainty over the global economy will hold down appetite to raise funds in the debt market. “Europe and Japan have been hit with economic slowdown while the US has yet to see the (light at the) end of the tunnel,” Yeah said.
Nonetheless, the bond market is still an attractive funding alternative for large-scale, long-term projects. RAM currently has about RM60bil worth of bonds in the pipeline, waiting to be issued when the “time is right.”
“It’s a good indication of the demand,” Yeah said, adding that the sukuk market was growing strongly propelled by government initiatives to attract investors from oil-rich countries in the Middle East.
Based on Bank Negara data, 60% of the outstanding global sukuk were from Malaysia as at end-2007. The Malaysian sukuk market has been increasing at an annual rate of 20%, and accounts for about 56% of the outstanding bonds in the country.
Last year, Malaysia’s new issuance of bonds amounted to RM123bil. In the first half, new issues amounted to about RM62bil, of which RM4.5bil were new Islamic bonds.
Meanwhile, the spike in yield levels has dampened the secondary bond market.
According to Aseambankers Malaysia Bhd head of fixed income research Tan Chee Wee, yield levels spiked up in June when the Government announced the petrol hike, hence raising expectation of higher inflation.
This led to a big sell-down in the bond market, wiping out gains secured in the beginning of the year when yields were falling, he said.
“Yields are still on an upward trend for now but this will depend on whether Bank Negara would reduce or maintain interest rates.
“If the central bank decides to keep monetary policy rate at 3.5%, the yield will eventually come down,” Tan added.
He noted that companies that were previously vying to issue bonds to raise capital had mostly held back as “it’s too expensive now.”
http://thestar.com.my/news/story.asp?file=/2008/9/11/business/1998052&sec=business
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