THE capital market, comprising equities and bonds, is projected to further expand in line with the stronger economy in 2004.
Islamic private debt securities (PDS) issuance is expected to sustain impressive growth seen in recent years, backed by increasing investor demand and with efforts to promote Malaysia as a regional centre in Islamic finance.
The consolidated and stronger banking system as well as the more vibrant capital market are poised to support stronger financing needs of the economy.
In the first six months of 2003, gross funds raised in the capital market totalled RM60.64bil, with RM31.31bil (or 51.6%) raised by the private sector and the remaining RM29.33bil (48.4%) by the public sector.
Funds raised by the public sector expanded 300% compared to the same period last year, due to higher financing needs by the Government.
The bulk was raised through the issuance of Malaysian Government Securities (MGS) amounting to RM25.86bil (Jan-June 2002: RM6.59bil).
This reflected the Government's commitment in establishing a benchmark yield for the development of the bond market through regular issuance of MGS while ensuring a liquid and active domestic bond market. It also provides a market-based instrument for open market operations.
After adjusting for redemptions of RM12.8bil, net funds raised expanded to RM16.53bil during the period compared to RM1.16bil in Jan-June last year.
In the PDS market, gross funds raised were higher at RM30.32bil in the first six months of 2003 (Jan-June 02 RM16.04bil) as companies turned to the bond market for longer term financing and debt restructuring, supported by low interest rates and ample liquidity.
By sector, funds raised were mainly for manufacturing, the government, finance and insurance, transport, as well as, real estate and business services.
The bulk of funds were raised through straight bonds, which accounted for 66.3%, while Islamic bonds accounted for 22.5% of the total amount generated from the PDS market.
On a net basis, funds raise by the private sector rose by more than three times to RM18.9bil during the period (Jan-June 2003).
The equity market was generally subdued during the first half, due to concerns of the Iraq war, SARS and global growth prospects. Funds raised through equity issues were lower amounting to RM997mil compared to RM9.24bil in Jan-June last year.
However market sentiment improved in the second half reflected by increased number of initial public offers (IPOs) at 19 between May and August, compared to 13 IPOs in the first four months of 2003.
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