KUALA LUMPUR: Danajamin Nasional Bhd, the national financial guarantee insurer, has received applications for credit enhancements to raise RM8.4 billion of bonds.
Bank Negara governor Tan Sri Zeti Akhtar Aziz said Danajamin, which provided credit enhancements for viable corporations to raise financing from the bond market, had within three months of operations, received two submissions with 30 more in the pipeline.
“These applications amounted to a credit enhancement to raise RM8.4bil of bonds,” she said.
The setting up of Danajamin was a pre-emptive measure to ensure that businesses continued to have access to bond market financing while the resumption of the Credit Debt Restructuring Committee was to facilitate the restructuring of debts which included the private debt securities of viable companies.
Zeti said signs of optimism had started to emerge in the bond market.
“The recent narrowing of spreads between benchmark issuances and triple A rated papers indicates that risk aversion has now eased,” she said.
Credit spreads between Malaysian Government Securities and AAA rated papers have narrowed to about 65 basis points from 190 basis points at the height of the economic crisis earlier this year.
In the primary market, new corporate bond issuance had increased by about 40% to RM28.4bil in the second quarter of this year while in the secondary market, the recent average daily trading volume also grew by more than 50%, Zeti said at the launch of AmBank group’s Malaysia Corporate Bond Handbook here yesterday.
Zeti said demand for higher-yielding securities was also beginning to rise, ahead of the recovery in the global economy.
“In addition, in view of the prospects for an earlier recovery in Asia, global investors in the current uncertain international environment will increasingly be looking at Asian financial markets for investment opportunities,” Zeti said.
This trend, she added, was already being observed through the substantial inflow of funds dedicated for emerging markets since mid-April with an estimated average inflow of US$144mil per week compared with net outflow recorded in the early part of the year.
Earlier, Zeti said local economic conditions had shown signs of improvement.
As labour market conditions stabilised and business and consumer sentiments turned positive aided by the accelerated implementation of the fiscal stimulus packages, continued access to financing and lower inflation, this would improve conditions in the second half of this year and into 2010, she noted.
At a press conference later, AmBank group treasury and markets managing director Teng Chean Choy said AmBank was expected to conclude some RM5bil worth of corporate bond deals during its financial year ending March 31, 2010 on increased investor appetite.
“There are four to five deals and they involve Danajamin and also some big corporates. I expect the momentum (for bond issuance) to keep going amid historical low interest rates,” he said. He dismissed fears about bond default rates, citing the improving credit market environment.
RAM Holdings Bhd chief economist Dr Yeah Kim Leng told StarBiz that bond default rates this year were expected to be higher than last year’s 0.2% due to the “lag effect” of the economic downturn but should remain below 1%.
At the height of the Asian financial crisis, the default rate was around 4.8%.
At yesterday’s function, AmBank group chairman Tan Sri Azman Hashim announced the renaming of the Group Treasury division to Treasury and Markets.
The division was expected to be a key revenue generator for the group in line with opportunities to expand its foreign exchange, interest rate derivatives and commodity hedging solutions segments in the current volatile market, he said.
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