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Tuesday August 11, 2009

Central Bank: Right time for Govt to issue Emas bond

KUALA LUMPUR: Bank Negara believes the time is right for the Malaysian Government to issue an Emas bond after Petroliam Nasional Bhd (Petronas) raised US$4.5bil through a combination of conventional bonds and sukuk that have attracted significant foreign interest.

The Emas bonds issued by Petronas attracted the largest order book for an Asian transaction at over US$19bil and the national oil company said it would assess future market conditions before raising more money through another Emas bond issue.

“We have always recommended the Government enter the market,” said Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz.

The Malaysian Government no longer has any international bonds as ample liquidity and a growing domestic sukuk and bond market are sufficient for it to raise the money it needs,

Gavernor of Bank Negara Malaysia Tan Sri Dr Zeti Akhtar Aziz with President and CEO of Petronas Tan Sri Mohd Hassan Merican at the inaugural issuance of the emas US$ sukuk and emas US$ bond by Petronas. Starpic by AZMAN GHANI.

Zeti said the Government’s international borrowings would be based on cost effectiveness and its requirements.

Zeti was speaking at a media conference with Petronas president and CEO Tan Sri Mohd Hassan Marican following the successful issuance of the Emas Dollar Bond and the Emas Dollar sukuk by Petronas.

The Petronas issuances attracted significant interest from a wide but predominantly Asian investor base. The US$3bil US dollar bond, which expires on Aug 12, 2019, and US$1.5bil sukuk, which is due Aug 12, 2014, were the largest dollar issuance outside of Japan this year and largest Asian issuance in the past five years.

Hassan said market conditions, liquidity and Petronas’ need for additional cash influenced its decision to tap the bond market.

Petronas last sold bonds in US dollars in 2002, when it raised US$700mil by issuing 7% bonds due in 2012.

The US$4.5bil dual-tranche global offering was the second largest Asian issuance in history.

“This issuance showcases Malaysia’s credentials as a centre of origination not only for ringgit bonds and sukuk, but also for issuance of foreign currency denominated bonds and sukuk. In Malaysia, the sukuk component has grown to be larger than its conventional counterpart,’’ said Bank Negara in a statement.

It added that Malaysia was currently the global leader in sukuk issuance, accounting for 62% of total global sukuk outstanding.

The Petronas bond and sukuk were the first to be given the Emas nomenclature and Bank Negara said the Emas designation would be given to foreign-currency denominated issuances from Malaysia.

“We felt the country reached a level of maturity for the bond and sukuk market and we decided to have visibility in the market,’’ said Zeti on the decision to brand Malaysian bonds and sukuk.

“Given the growing maturity of our bond market, it is timely that Malaysia offer its own brand proposition to distinguish foreign currency denominated bonds and sukuk originating from Malaysia in the global capital market,’’ Bank Negara said in the statement.

Hassan said that Petronas would “continue to explore the possibility” of listing its subsidiaries. However, Petronas is not considering going public at present.

For Bank Negara statements click here

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