Weak RM won't have serious impact on bond market
Published on: Tuesday, September 01, 2015
Kuala Lumpur: Danajamin Nasional Bhd, Malaysia's first and only financial guarantee insurer, is optimistic that the weaker ringgit will not have a significant impact on the local bond market.managing director and chief executive officer Mohamed Nazri Omar said foreign issuers would be more interested to issue their bonds and sukuk here because of the current price competitiveness."We don't see the ringgit devaluation stopping (bond and sukuk) issuers from coming here. The Middle Easterners, in particular, have been keen to issue their Islamic bonds or sukuk here because of Malaysia's Islamic finance strength as well as the cost-effectiveness. Cheaper ringgit will translate into cheaper cost for them, too."ADVERTISEMENT Mohamed Nazri said the Malaysian bond landscape had come a long way since the the firm's establishment in 2009.Danajamin, which is equally owned by the Minister of Finance Inc and Credit Guarantee Corp Malaysia Bhd, is well-positioned to further enable the development of Malaysia's capital market.As at December 31 last years, its total assets and shareholders' equity stood at RM1.9 billion and RM1.3 billion, respectively.Danajamin's main objective is to ensure that financially-viable corporates can continue to access the bond market for their long-term financing need and, at the same time, be an enabler to further develop the domestic bond and sukuk markets.ADVERTISEMENT To date, it has provided its guarantee for over RM7.9 billion bond and sukuk programme collectively, issued by 27 companies across various sectors."We have guaranteed RM7.9 billion since 2009 and I am proud to say that none of these deals have defaulted.
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This demonstrates the strength as well as the capabilities of Malaysian capital market. In fact, I believe that if we at Danajamin do our job well, pretty soon we will not be needed," he said.Mohamed Nazri explained that in the early days, Danajamin used to fully guarantee deals (sukuk or bond issuances), but things changed a few years ago."We started risk-sharing with the issuing and underwriting banks involved in the deals many years ago and the fact that they would risk-share with us showed the investors that bankers are confident of their deals. This, in turn, inspires confidences from the investors.Stay up-to-date by following Daily Express’s Telegram channel.
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"Initially, Danajamin used to guarantee 100 per cent of the deals but since last year, we guarantee deals at 40 per cent. Pretty soon, the guarantee for local issuances by Danajamin will not have be needed and this is a good thing," he said.Danajamin has an "AAA" rating by both RAM Rating Services Bhd and Malaysia Rating Corp Bhd.