Kuala Lumpur (The Star/ANN) - The Malaysian corporate bond market is expected to continue growing robustly, with gross issuance of private debt securities (PDS) in the country expected to reach a record 80 billion ringgit (US$25.07 billion) to 90 billion ringgit ($28.20 billion) for 2012, up from around 60 billion ringgit ($18.80 billion) last year, said RAM Rating Services Bhd.
For the first half of 2012, gross PDS issuance had already reached 62.9 billion ringgit ($19.71 billion), compared with 31.2 billion ringgit ($9.78 billion) during the corresponding period last year.
"The corporate bond market in Malaysia is certainly poised for exciting growth in the years ahead," RAM Holdings Bhd group chief economist Dr Yeah Kim Leng said.
Speaking to reporters on the sidelines of the annual bond conference, entitled "Making the Asian Bond Market a Reality", Yeah said "the PDS issuance in Malaysia will be driven mainly by the need to finance sizeable government-related infrastructure projects, especially those outlined in the Economic Transformation Programme (ETP) such as the Mass Rapid Transit and Light Rail Transit extension projects, as well as financial institutions' need to broaden their capital bases."
Yeah expects PDS to play an increasingly important role in private sector domestic financing in Malaysia, with the instrument rising to represent around 40% to 50 per cent of private sector domestic financing by 2015, compared with around 30 per cent to 35 per cent currently.
He added that the robust growth of PDS issuance in the country would be supported by strong demand for the instruments, as investors continue to seek good quality assets in which to park their funds.
Yeah noted in his presentation at the conference organised by RAM that the bond market in Asia had generally experienced phenomenal growth over the past decade.
As at the end of last year, Asian bond market was valued at around $18.3 trillion, of which $15.3 trillion was made up of government bonds, and $3 trillion corporate bonds.
That was almost double of its size of $9.5 trillion in 2003.
The rapid growth of capital markets in Asia had mainly been driven by post-Asian Financial Crisis initiatives, which among other things, focused on reducing private sector's over-dependence on banking system for financing needs, large infrastructure financing needs in the region and the need to broaden and deepen the financial system, which included mobilising large amount of savings and reserves into financing long-term investments.
The Asian Development Bank has pointed out that Asia-Pacific's infrastructural gap, such as that for energy, transport and communications, would require a funding of $8 trillion in the current decade.
Yeah said infrastructure would, therefore, be the sector to provide substantial potential for growth in the region's bond market.
He estimated that Asian countries would need to raise $400 billion to $600 billion a year to support infrastructure development.
Meanwhile, Yeah expected the low interest rate environment and the ongoing eurozone debt crisis to increase the attractiveness of emerging Asian bonds.
On another positive note, he said the sound fundamentals and good growth prospect of Asian countries would earn them greater stability in credit risk ratings.