KUALA LUMPUR: Malaysia’s two biggest banks are predicting a pickup in the country’s Islamic bond sales as companies try to refinance debt before the Federal Reserve raises interest rates.
Forecasts that the Fed will keep interest rates lower for longer have given local businesses a bigger window to refinance, according to Malayan Banking Bhd and CIMB Group Holdings Bhd.
MMC Corp, a Kuala Lumpur-based infrastructure firm, started marketing RM1.5bil (US$361mil) of syariah-compliant bonds to refinance non-Islamic loans this month, said managing director Che Khalib Mohamad Noh.
A successful sale by MMC will push local-currency issuance this quarter to RM3bil, nearly half the RM7.2 bil total during the previous three months. An index of Malaysian corporate sukuk yields rated AA- has declined this month after rising the most since 2008 last quarter, while the ringgit posted its biggest surge in 17 years last week amid a rally in emerging-market assets.
“Now is a good time for corporates to tap the market,” said Nik Mukharriz Muhammad, a Kuala Lumpur-based fixed-income analyst at the investment-banking unit of CIMB, Malaysia’s second-biggest lender by assets. “Issuers will be able to get better pricing” before the Fed raises borrowing costs, he said.
Khazanah Nasional Bhd, Malaysia’s sovereign wealth fund, kicked off third-quarter sukuk sales with a RM1.5bil offer last week that’s set to be issued on Oct 19, according to people familiar with the matter who didn’t want to be named as the information isn’t public yet.
The notes due 2022 were sold to yield 4.57%. Jimah Power East Sdn Bhd, a unit of state- owned utility Tenaga Nasional Bhd, is planning a RM10bil Islamic bond sale this month, people familiar with the offer said.
MMC, which has power, ports and construction divisions, hired RHB Investment Bank Bhd as the lead arranger and manager. The offer has been rated AA-, the fourth-highest investment grade, by Malaysian Rating Corp.