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Tuesday, 16 July 2013

Malaysia: AMMB beats CIMB as top sukuk arranger

AMMB Holdings Bhd overtook CIMB Group Holdings Bhd as the top underwriter for Malaysian sukuk this year after being the sole arranger of 2013’s biggest deal. 

The lender’s market share rose to 26 per cent after managing RM5.1 billion of bond offerings including power producer Tenaga Nasional Bhd’s RM2 billion sukuk, data compiled by Bloomberg show. CIMB, which led the rankings for the past six years, oversaw RM3.5 billion, giving it an 18 per cent slice of the RM19.9 billion total. 

AMMB took up the entire Tenaga issue under a bought deal, where the arranger shoulders the risk of selling all the debt, demonstrating confidence in pent-up demand from Shariah-compliant investors after issuance trailed last year’s record. Sales will pick up in the second half because RM211 billion of projects in the government’s 10-year development plan will need financing, according to AmInvestment Bank Bhd. 

"We believe there are still a lot of sukuk financing opportunities in this country given the amount of infrastructure projects," Datuk Mohd Effendi Abdullah, the head of Islamic markets at AmInvestment Bank, a unit of AMMB, said in an interview yesterday in Kuala Lumpur. "Our focus will be in Malaysia." 

Badlisyah Abdul Ghani, chief executive officer at CIMB Islamic Bank Bhd, said the Tenaga sales arrangement reduced the risk of higher yields for the company arising from speculation the Federal Reserve would cut stimulus. 

CIMB Islamic, a unit of CIMB Group, Malaysia’s second-biggest lender, would have participated had it been invited, Kuala Lumpur-based Badlisyah said in an interview yesterday. 

"We are comfortable that we will end the year in the top two given that we are working on some 20 billion ringgit of deals," he said. 

Malaysian issuance of Shariah-compliant securities fell in the first half amid concern about the outcome of a May national election that saw Prime Minister Datuk Seri Najib Razak’s ruling party retain power. Offerings totaled RM54.6 billion ringgit in the same period of 2012, according to data compiled by Bloomberg. 

The Bloomberg-AIBIM Bursa Malaysia Corporate Index, which tracks 57 ringgit-denominated sukuk in the world’s biggest market for the debt, gained 0.2 per cent in the past two weeks to 104.5606 and has increased 2.2 per cent this year. 

Borrowing costs on global Islamic bonds, which pay returns on assets to comply with the Koran’s ban on interest, dropped last week after Federal Reserve Chairman Ben S. Bernanke signaled stimulus measures would still be required. 

Average yields on the securities fell 18 basis points, or 0.18 percentage point, to 3.81 per cent in what was the best five-day performance since October 2011, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index. Rates reached an all- time low of 2.67 per cent January 10. The difference between average yields and the London interbank offered rate was steady at 197. 

Islamic bonds sold on the international market posted a loss of 1.2 per cent this year, the HSBC/Nasdaq index shows, while debt in emerging nations dropped 8.3 per cent, according to JPMorgan Chase & Co’s EMBI Global Index. 

Companies in Malaysia need to raise funds to finance projects under Najib’s US$444 billion 10-year development plan to build roads, railways and power plants. The Southeast Asian nation aims to achieve developed status by 2020. 

Malaysian sales of Shariah-compliant notes could reach RM70 billion this year given the infrastructure funding element, according to Peter Choong, head of debt at RHB Investment Bank Bhd. Local companies sold an unprecedented RM95.8 billion in 2012. 

The lender, a unit of RHB Capital Bhd, is placed third in the underwriter rankings this year after managing RM3.54 billion, RM4.5 million less than CIMB. RHB was fourth in the league table for the whole of last year, behind Malayan Banking Bhd in second and AmInvestment Bank in third. 

"Right after the elections until the end of last month, we had done nine bond sales totaling RM2.7 billion," Kuala Lumpur-based Choong said in a July 11 interview. "We have about RM10 billion of deals in the pipeline and are still pursuing more transactions." 

RHB and CIMB plan to leverage on their regional networks to bring in more ringgit deals. AMMB will look for opportunities overseas in an effort to stay in the top three, Mohd Effendi said. 

"There are potentially five offshore issuers from this region waiting for the right timing to tap the market," RHB’s Choong said. "We have a niche here and this is contributing to our higher ranking in sukuk sales.

(Business Times / 16 July 2013)

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