TOTAL funds raised in the ringgit bond market were significantly higher in 2003, Bank Negara said. The low interest rate environment and ample liquidity were the main factors influencing the growth of the private debt securities (PDS) market, it said.
Gross issuance increased 75% due to higher issuance by the public and private sectors. Excluding redemptions made during the year, total net funds raised in the bond market amounted to RM42.5bil (RM10.6bil in 2002). As a result, outstanding ringgit bonds rose 16.7% to RM319.4bil, which is equivalent to 81.5% of GDP.
As corporate borrowers stepped up their net issuances during the year, outstanding PDS increased 14.4% to RM170.2bil, or equivalent to 43.4% of GDP, accounting for 53% of total bonds outstanding.
Trading activities in the ringgit bond market grew nearly 12% to RM436.8bil, with more activities occurring in the first half of the year.
The bond market commenced the year on a strong note as the underlying market conditions were favourable to both issuers and investors during the first half.
With the falling yields and strong demand for debt securities, corporations increased bond issuances during this period. About 65.8% of the corporate bonds were issued in the first six months of 2003.
Bond yields reversed direction and trended upwards in the second half of the year amid improving economic growth. Consequently, trading in bonds turned subdued, with a 47% reduction in trading volume, compared with the first half.
Nevertheless, bond yields stabilised in December following portfolio rebalancing activities and strong buying interest of quality papers.
The ample liquidity enabled the Federal Government to raise funds without crowding out the private sector.
The Federal Government made 12 Malaysian Government Securities (MGS) issuances, with gross proceeds totalling RM41.3bil. Including net issuance of Khazanah bonds, the total outstanding public sector bonds rose to RM149.3bil, or equivalent to 38% of GDP.
During the year, the bulk of the new issues (52% of total value) were for tenures of between five and 10 years in response to investors' preference for short- to medium-end PDS. On average, the PDS issue sizes increased to RM602.5mil per issuer in 2003 from RM494.7mil in 2002.
Straight bonds were the most preferred form of debt securities, accounting for 50.4% of total bonds issued.
Cagamas Bhd remained as an active issuer. It issued 33 issues of debt securities worth RM17.9bil.
A wide range of asset backed securities (ABS) were issued. In total, 10 ABS amounting to RM7bil were issued.