THE growing trend in tapping private debt securities (PDS) in the corporate sector is expected to continue to buoy the local bond market this year.
Momentum looks very strong in the debt market. This is a good year for the bond market and merger and acquisition (M&A) activities, but not so good for equities,'' CIMB Bhd chief executive Nazir Razak told a press conference after the company KLSE main board listing ceremony yesterday.
Nazir, who is also CIMB managing director, expects bond issuance of RM40bil this year compared with RM32bil last year, representing a 17% growth in the domestic bond market.
But the value of initial public offerings (IPOs) would shrink to RM4bil this year from RM12bil last year. One reason for the sharp fall was the higher base factor last year, which saw two large flotation exercises, those of Maxis Communications Bhd and Plus Bhd, he explained.
However, Nazir pointed out that the local bond market was still in its infancy although it had experienced strong growth after the regional financial crisis in 1997/98.
More liquidity and players were essential if the local bond market were to forge ahead, he said.
He also hopes to see lower grade credits in the market, instead of only high rated bonds being made available.
Given the more active PDS market, CIMB's income would come mainly from involvement in bond issuance and M&A exercises as a result of the slowdown in the equities market, he said.
The group hopes to secure a large portion of the bond issues this year.
We always want to be number one in what we are doing,'' Nazir added.
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