KUALA LUMPUR: Demand for Malaysia’s Islamic bonds and sukuk with longer maturity is expected to remain strong, supported by domestic institutional investors, according to Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz.
“We have many institutional investors in our domestic system, ranging from those in the insurance industry to pension funds.
“They represent a major source of demand for our (debt) papers,” she told reporters after an event to launch the new iconic brand identity, “Malaysia: World’s Islamic Finance Marketplace”.
Bloomberg recently reported that Malaysia had plans to roll out 20-year syariah-compliant securities next month.
Zeti did not confirm the timing of the issuance of the new securities, which would represent Malaysia’s longest-maturity Islamic debt ever introduced to date, although she did say the issuance would be done “according to plan.”
On the recent sell-off of Malaysian bonds, Zeti said there was no reason to over-react.
“We’ve seen this from time to time,” she said, noting that a significant amount of the country’s debt papers was held by non-resident investors because of the favourable yields.
“Malaysia represents a highly open market and we experience inflows of funds, and sometimes we see reversals,” she explained.
Zeti added that Malaysia could cope with such volatility because its financial market was one of the most developed among emerging economies.
Meanwhile, Zeti said Malaysia had the capacity and capability to address its fiscal vulnerabilities in a gradual and sequenced manner.
“Malaysia still has time to do it; but of course, it is now more urgent because the global environment has become more challenging,” she told reporters.
“The recovery that we had expected from major economies has not strengthened. And, going forward, it is very likely that it would continue to remain modest.
“Therefore, it is important for us to reduce our vulnerabilities, one of which is in the fiscal area,” Zeti explained, adding that Malaysian policymakers were putting emphasis on increasing the country’s resilience and boosting its potential to sustain economic growth.