THE International Bank for Reconstruction and Development (IBRD), commonly known as the World Bank, has launched its first ringgit-denominated bond in Malaysia.
Speaking at the launch of the RM760mil IBRD Wawasan Bonds in Kuala Lumpur yesterday, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said the decision by the World Bank to launch its bond in Malaysia was reflective of its confidence in the Malaysian capital market. CIMB Bhd and ABN Amro Holdings NV are joint lead managers for the Wawasan Bonds, which mature in 2010.
This Islamic securities issuance is the largest ringgit issuance by a supranational to-date and Bank Negara looks forward to seeing other non-resident issuers participating in the ringgit capital market, Zeti said.
Zeti said to meet investors' demand and further diversify the range of Islamic financial instruments, the Government had recently issued shorter-term Islamic Treasury Bills and longer-term Islamic bonds with a maturity of 10 years.
The ringgit bond market is becoming an increasingly important source of financing to the economy, she said, adding that total ringgit bond financing was RM85.8bil in 2004.
As a result, Zeti said total outstanding ringgit bonds increased by 10.7% to RM363bil, which was equivalent to 81% of the gross domestic product.
The general market conditions have remained favourable for both issuance and trading activities, given the low inflation and interest rate environment and the strengthening of economic fundamentals, she said.
Zeti also noted that the Islamic bond market had experienced exceptional growth.
In 2004, the Islamic bond market expanded by 13.4%, she said.
Zeti said to further enhance market turnover, Bank Negara in January had announced the usage of repurchase agreements as a monetary policy instrument by introducing the Institutional Custodian Programme to facilitate easier borrowing and lending of securities.
CIMB Group chief executive Datuk Nazir Razak said the World Bank would be the third supranational to raise ringgit bond financing in Malaysia following the Asian Development Bank (RM400mil 5-year) and International Finance Corp (RM500mil three-year) bond issues last year.
The presence of securities of the World Bank will strengthen the profile of Islamic finance and the ringgit Islamic market, he said.
On investors' response to Wawasan Bonds, Nazir said: With its superior credit rating of AAA by international rating agencies as well as the special regulatory treatment accorded to the securities, CIMB anticipates that the bonds will be well received by ringgit bond investors.
A Bloomberg report said bankers expect the World Bank to sell at least RM1bil Islamic bonds within the year.
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