KUALA LUMPUR: Malaysia plans to sell as much as US$1.5bil of global Islamic bonds, less than a month after Indonesia's sukuk attracted bids for more than three times the amount offered.
The marketing of the notes started yesterday and they will likely have maturities of 10 and 30 years, according to two people familiar with the matter, who asked not to be identified because the information is private. The proceeds will be used to refinance US$1.2bil of syariah-compliant debt coming due in July, one of them said.
Malaysia’s sale coincides with a rebound in the ringgit, which has rallied more than 10% this year after being Asia’s worst-performing currency in 2015.
A recovery in Brent crude is also brightening the outlook for the oil exporter's finances just as sentiment is improving after an indebted state investment company sold off assets. The cost to protect the nation’s sovereign notes from default has also dropped in 2016 from a more than six-year high reached in September.
“The current market conditions are supportive of the issuance,” said Winson Phoon, a fixed-income analyst at Maybank Investment Bank Bhd. in Kuala Lumpur, a unit of Malaysia's biggest Islamic bond arranger. “Demand will be strong given that the size isn’t too excessive and after the keen interest in the Indonesian sovereign.”
Malaysia sold US$1.5bil of US currency sukuk in April 2015, its first international bond since 2011. It issued US$1bil of 10-year securities to yield 3.04% and US$500mil of 30-year debt at 4.24%.
The yield on the shorter-maturity notes has declined 66 basis points in 2016 to 2.94%, while that on the 2045 debt fell 82 basis points to 3.89%, data compiled by Bloomberg show. Malaysia is rated A- by both Standard & Poor's and Fitch Ratings, and A3 by Moody's Investors Service, their fourth- lowest investment grades. — Bloomberg