Malaysia's latest issue of five-year global bonds advanced on their first day of trading after yesterday's sale attracted orders for more than five times the US$1 billion (RM3.3 billion) originally sought.

The Islamic notes due June 2015 yielded 3.87 per cent early yesterday in Hong Kong, six basis points less than the 3.93 per cent the securities were priced at in yesterday's sale, according to data provided by Barclays plc, one of the deal's three arrangers. That's 171 basis points more than similar-maturity US Treasuries, nine basis points less than when the bonds were sold.

"Malaysia is oil-rich, the fundamentals are solid and they don't have funding needs," Paul Chan, the Hong Kong-based chief investment officer at Invesco Asia Ltd, said before the sale. "There will be scarcity value in Malaysia's dollar bonds. Asian countries are generally underrated" given what's happening in Europe, he said.

Malaysia's sale of so-called sukuk notes, its first international debt issue since 2002, will set a new benchmark for pricing bonds in the nation, Prime Minister Datuk Seri Najib Razak said on May 19.
The government sold US$1.25 billion (RM4.1 billion) of the securities, after attracting orders of almost US$5.5 billion (RM18.2 billion), according to a sale document obtained by Bloomberg. CIMB Group Holdings Bhd and HSBC Holdings plc, along with Barclays, arranged the offering.

Islamic bond sales are growing for the first time since 2007 as yields on securities complying with the religion's ban on interest fall more than those on emerging-market debt even as Europe's debt crisis worsens.

Offerings of sukuk have climbed 10 per cent to US$6.1 billion (RM20.2 billion) so far this year, the most since a 47 per cent increase in the same period three years ago, according to data compiled by Bloomberg.

Malaysia has the world's biggest market for Islamic bonds, which are backed by physical assets and pay profit rates instead of interest that is prohibited under syariah principles. The country accounted for 65 per cent of outstanding sukuk last year, according to CIMB Group Holdings Bhd, one of the lead arrangers for the latest notes.

The sukuk, which is of the Ijarah structure, were assigned debt ratings of "A-" by Standard & Poor's (S&P) and "A3" by Moody's Investors Service last week, the two company's fourth lowest investment grades. Greece, which sparked the European debt crisis amid concern about its ability to repay investors, has a junk, or high-risk, rating of "BB+" from S&P.

The premium investors demand to hold bonds in developing nations over US Treasuries narrowed 20 basis points yesterday to 319 basis points, according to JPMorgan Chase & Co's EMBI+ Index. A basis point is 0.01 percentage point.

Malaysia's latest bond issue would pay returns with rental income received by leasing 12 state-run hospitals, according to a sale document obtained by Bloomberg News last week.

State-owned Petroliam Nasional Bhd's (Petronas) 4.25 per cent Islamic bonds due August 2014 yielded 3.92 per cent yesterday, according to Royal Bank of Scotland Group plc, or 207 basis points more than similar-maturity Treasuries.

"Usually the trading differential between Petronas and Malaysia is 20 or 25 basis points, so that's what I was expecting," said Brayan Lai, a Hong Kong-based credit analyst at Credit Agricole CIB. "The issuer came into a rally in the markets, so they probably got a good deal." - Bloomberg

source HERE

Posted by Mr Thx Saturday, May 29, 2010


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