ALTHOUGH the value of local bonds issued this year is expected to hit RM35bil, the supply will still be insufficient to meet market demand, said CIMB Bhd chief executive office Datuk Nazir Razak.
Demand for both corporate and Islamic bond is predicted at RM40bil but so far this year, only a total of RM13bil has been issued, he said during the Investors Conference 2005 in Kuala Lumpur yesterday.
Speaking at the sidelines of the conference, CIMB head of debt capital market and syndicate, Thomas Meow, said the shortage of bond supply had created a market that is not over-dependent on foreign investors.
In the event that all foreign investors withdraw their money from the bond market, a normal bond yield would only move 30 to 40 basis points which has very minimal impact on the market, Meow said, adding that a re-peg of the ringgit would also not affect the bond market.
He said the bond market had declined slightly last year at a total of RM28bil issuance, as some companies delayed issuing their bonds.
With the postponed bonds carried out this year and smaller companies entering the bond market, we are confident the market's total Islamic and corporate bond issuance will hit RM35bil this year, he said.
Foreign investors were also buying more longer term bonds which indicated increased confidence in the local market and in the legal framework, said Meow.
Meanwhile, RHB Securities Sdn Bhd chief executive officer Dr Zaha Rina Zahari said an increasing free float of shares in Government-linked companies would improve liquidity in the equity market and push Malaysias weighting in the Morgan Stanley Capital International benchmark, making it more attractive to global investors.
She said the current lack of liquidity had often been cited as the key reason for the Kuala Lumpur Composite Index's underperformance.
Malaysias turnover velocity (total market value over average market capitalisation for a specific period) is the second lowest in the region after the Philippines despite having strong economic fundamentals, she said.
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