Islamic bond sales in Malaysia are set for the best quarter in more than a year as infrastructure firms take advantage of the lowest borrowing costs in 16 months.
State-owned DanaInfra Nasional Bhd. led companies in raising RM17.9 billion since March 31, compared with RM8 billion in the first three months, data compiled by Bloomberg show. The yield on Malaysia’s top-rated 10-year debt sank to 4.59% on June 5, the lowest since February 2014, and was at 4.61% as of June 19.
Sales this year in the world’s biggest sukuk market will probably climb to the highest level since 2012 as Malaysian companies tap a record RM625 billion of Islamic banking assets to fund Prime Minister Datuk Seri Najib Razak’s plans for more railways and roads, according to CIMB Group Holdings Bhd.
The top sukuk arranger in 2014 says companies will bring forward issuance to lock-in low rates before the Federal Reserve raises interest rates.
“The window to sell is between now and the end of the year,” said Badlisyah Abdul Ghani, the Kuala Lumpur-based chief executive officer at the Islamic banking unit of CIMB Group.
“We have a healthy pipeline of companies looking to tap the market this year.”
DanaInfra, formed to finance the country’s MRT project, asked bankers to submit proposals for a RM40 billion Islamic debt programme this month. SapuraKencana Petroleum Bhd plans to sell RM7 billion of such notes.
Najib, who is pushing for higher spending to help Malaysia achieve its goal of attaining developed-nation status by 2020, said in his October budget work will start in 2015 on projects valued at RM75 billion.
This year’s sukuk issuance could surpass RM70 billion, the highest since a record RM109.5 billion in 2012, according to CIMB and and AmInvestment Bank Bhd, Malaysia’s fourth-biggest arranger of Islamic notes.
RHB Capital Bhd., the top arranger this year, expects sales to be similar to last year’s total of RM65.1 billion as a slowing economy prompts companies to review their spending plans.