KUALA LUMPUR: The Government's proposal to liberalise the bond market approval framework announced at the launch of Invest Malaysia 2008 may see the issuance of more non-ringgit denominated debt.
The liberalisation would involve the extension of the “deemed approved” process to all domestic or foreign issuers that have been rated AAA by domestic rating agencies or a minimum BBB rating by foreign agencies.
The “deemed approved” process would also be extended for the issuance of non-ringgit bonds by all local and foreign issuers with a minimum BBB rating by foreign agencies.
Additionally, ringgit bond issuers that have been accorded “deemed approved” status would be exempted from trust deed and trustee requirements.
Currently, there is an existing “green lane” process for bond offerings made by highly-rated bond issuers in which such issuances were “deemed approved” and issuers only had to submit applications to the Securities Commission as a matter of formality.
According to Aseambankers Malaysia Bhd vice-president and head of fixed income research Tan Chee Wee, this was done to encourage the issuance of non-ringgit denominated securities, which was currently minimal compared with ringgit-denominated securities.
He said according to Practice Note 1A issued by Bursa Malaysia, non-ringgit denominated bonds had to have a rating of at least A- for it to be fast-tracked.
Tan was commenting on the speech by Prime Minister Abdullah Ahmad Badawi at yesterday's Invest Malaysia 2008 launch.
“As of January 2008, the corporate debt market has RM208.8bil outstanding while the government debt market has RM225.2bil outstanding,” Tan told StarBiz.
He said the measures to liberalise the approval framework would also increase the market size, making it more competitive and vibrant.
Tan said there was no question of the bonds' quality despite the liberalised approval framework.
“They'll still have to go through the rating agencies first where the bonds will be assessed on risks and then the Securities Commission will go through the reports,” he added.
RAM Rating Services Bhd managing director Wong Fook Wah said in an e-mail statement that the company welcomed the establishment of a third rating agency in the country.
“We welcome another agency, especially if there are credible shareholders to ensure the new agency operates on international standards like RAM. Competition is good for the market,” he said.
Wong was commenting on the Government's proposal to allow the establishment of a third rating agency in the country.
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