ThxPORTAL - My OnlinE InvestmenT ProgresS

KUALA LUMPUR: Malaysia will offer around US$1bil in a global sukuk issue to investors from Wednesday, its first international debt sale since 2002, two sources familiar with the planned issue told Reuters.

The sources said the Government was targeting about US$1bil (RM3.2bil) for the bond that would be entirely sukuk and would be launched at an Islamic economic forum.

Lead managers for the deal are CIMB and HSBC.

CIMB declined to comment while HSBC was not immediately available.

“(The government) is targeting about US$1bil,” one of the sources familiar with the deal told Reuters, adding that there would be a global roadshow for the paper.

The sale comes as global credit markets grapple with worries of another crisis after the recent sell-off sparked by credit worries in Europe.

Malaysia last tapped the global bond market in 2002 when it raised US$600mil through the sale of its first international sukuk.

Sukuk can have higher yields than conventional paper because of the relatively illiquid secondary Islamic bond market but a global sukuk offering would help reinforce Malaysia's ambitions to become an international syariah banking hub.

Prime Minister Datuk Seri Najib Razak had said in April Malaysia would likely tap global bond markets by offering a US dollar Islamic bond to test investor appetite for its assets. The country usually relies on domestic bond issuances to fund its expenditure. The government sold RM88.5bil ringgit of bonds in the country last year with Islamic paper accounting for a third of that, according to central bank data.

Malaysia has only one outstanding conventional bond -- due in 2011and worth US$1.75bil. The country ran a budget deficit of 7.4% in 2009, its highest in more than two decades. It aims to reduce that to 5.6% this year. - Reuters

source HERE

How can you track the risk of significantly higher inflation?

Simple. Just follow the government long-bond market. If the market gets a whiff of double-digit, or even high single-digit, annual inflation, the U.S. bond market will collapse.

There's an ETF that makes it easy to follow the U.S. long bond market – TLT.

Here's the chart:



What you can see is that the government long-bond market peaked at the height of the banking crisis, just after the failure of Lehman Brothers, the near collapse of all of the investment banks, and the bankruptcy of Fannie, Freddie, and GM. Investors were scared to own anything other than government paper. Nobody was worried about inflation because the economy had come to a standstill.

Now, all of those forces are working in reverse – and Washington is pulling all the strings. The government can print as much money as it likes. But the dollar will fall in value. And its creditors will begin to demand much higher interest rates. You can bet on it. As interest rates rise, the value of existing government bonds – which have fixed coupon payments – will fall.

I'm not a chart reader. I don't put much stock in so-called "technical" analysis. On the other hand, I have seen that markets tend to bounce off certain prices a few times before making a big move – like a shark bumping its prey before eating it. TLT seems like it wants to break through that 90 barrier. It keeps "bumping" it.

I'd keep my eye on it.

source HERE

The contraction of M3 money in the US and Europe over the last six months will slowly puncture economic recovery as 2010 unfolds, with the time-honoured lag of a year or so. Ben Bernanke will be caught off guard, just as he was in mid-2008 when the Fed drove straight through a red warning light with talk of imminent rate rises – the final error that triggered the implosion of Lehman, AIG, and the Western banking system.

As the great bear rally of 2009 runs into the greater Chinese Wall of excess global capacity, it will become clear that we are in the grip of a 21st Century Depression – more akin to Japan's Lost Decade than the 1840s or 1930s, but nothing like the normal cycles of the post-War era. The surplus regions (China, Japan, Germania, Gulf ) have not increased demand enough to compensate for belt-tightening in the deficit bloc (Anglo-sphere, Club Med, East Europe), and fiscal adrenalin is already fading in Europe. The vast East-West imbalances that caused the credit crisis are no better a year later, and perhaps worse. Household debt as a share of GDP sits near record levels in two-fifths of the world economy. Our long purge has barely begun. That is the elephant in the global tent.

We will be reminded too that the West's fiscal blitz – while vital to halt a self-feeding crash last year – has merely shifted the debt burden onto sovereign shoulders, where it may do more harm in the end if handled with the sort of insouciance now on display in Britain.

Yields on AAA German, French, US, and Canadian bonds will slither back down for a while in a fresh deflation scare. Exit strategies will go back into the deep freeze. Far from ending QE, the Fed will step up bond purchases. Bernanke will get religion again and ram down 10-year Treasury yields, quietly targeting 2.5pc. The funds will try to play the liquidity game yet again, piling into crude, gold, and Russian equities, but this time returns will be meagre. They will learn to respect secular deflation.

Weak sovereigns will buckle. The shocker will be Japan, our Weimar-in-waiting. This is the year when Tokyo finds it can no longer borrow at 1pc from a captive bond market, and when it must foot the bill for all those fiscal packages that seemed such a good idea at the time. Every auction of JGBs will be a news event as the public debt punches above 225pc of GDP. Finance Minister Hirohisa Fujii will become as familiar as a rock star.

Once the dam breaks, debt service costs will tear the budget to pieces. The Bank of Japan will pull the emergency lever on QE. The country will flip from deflation to incipient hyperinflation. The yen will fall out of bed, outdoing China's yuan in the beggar-thy-neighbour race to the bottom. By then China too will be in a quandary. Wild credit growth can mask the weakness of its mercantilist export model for a while, but only at the price of an asset bubble. Beijing must hit the brakes this year, or store up serious trouble. It will make as big a hash of this as Western central banks did in 2007-2008.

The European Central Bank will stick to its Wagnerian course, standing aloof as ugly loan books set off wave two of Europe's banking woes. The Bundesbank will veto proper QE until it is too late, deeming it an implicit German bail-out for Club Med.

More hedge funds will join the EMU divergence play, betting that the North-South split has gone beyond the point of no return for a currency union. This will enrage the Eurogroup. Brussels will dust down its paper exploring the legal basis for capital controls. Italy's Giulio Tremonti will suggest using EU terror legislation against "speculators".

Wage cuts will prove a self-defeating policy for Club Med, trapping them in textbook debt-deflation. The victims will start to notice this. Articles will appear in the Greek, Spanish, and Portuguese press airing doubts about EMU. Eurosceptic professors will be ungagged. Heresy will spread into mainstream parties.

Greece's Prime Minister Papandréou will balk at EMU immolation . The Hellenic Socialists will call Europe's bluff, extracting loans that gain time but solve nothing. Berlin will climb down and pay, but only once: thereafter, Zum Teufel.

In the end, the Euro's fate will be decided by strikes, street protest, and car bombs as the primacy of politics returns. I doubt that 2010 will see the denouement, but the mood music will be bad enough to knock the euro off its stilts.

The dollar rally will gather pace. America's economy – though sick – will shine within the even sicker OECD club. The British will need the shock of a gilts crisis to shatter their complacency. In time, the Dunkirk spirit will rise again. Mervyn King's pre-emptive QE and timely devaluation will bear fruit this year, sparing us the worst.

By mid to late 2010, we will have lanced the biggest boils of the global system. Only then, amid fear and investor revulsion, will we touch bottom. That will be the buying opportunity of our lives.

source HERE

Kuala Lumpur: Malaysia plans to conduct 19 bond sales next year to help raise funds for development projects and fin-ance its budget deficit.

The government will sell notes maturing in 2013, 2015, 2017, 2019, 2020 and 2030, comprising both conventional and Islamic securities, according to a sale calendar published by Bank Negara Malaysia on its website. The central bank, which conducts debt auctions on behalf of the treasury, didn't provide details on the amount to be raised at each debt sale.

Malaysia raised a record 88.5 billion ringgit (Dh95.42 billion) this year, a 48 per cent increase from 2008 and the most since records began in 1991.

It will step up "fiscal discipline" next year to help narrow the deficit to 40.5 billion ringgit, or 5.6 per cent of gross domestic product, the finance ministry said in October.

Prime Minister Najib Razak has unveiled 67-billion ringgit of stimulus measures in the past year and the central bank has maintained its overnight policy rate at 2 per cent since February to help the nation climb out of its recession. The government also raised 5 billion ringgit from the sale of 2012 bonds to retail investors in May.

The finance ministry estimated the budget shortfall for 2009 at 51.1 billion ringgit, or 7.4 per cent of GDP, the highest proportion since 1987. Islamic debt, or sukuk, pays a profit rate to investors from an underlying asset instead of interest, which is prohibited by Sharia.

source HERE

In Wednesday's Digest, I showed you why most investors should focus on bonds... not stocks. Yes, that's a curious thing for a newsletter publisher like me to write about. After all, most of our products focus on stocks.

But I know it's true. Bonds are far safer than stocks and, if you'll use just a bit of common sense, you can easily make more money in bonds than you will in most stocks. Unfortunately, outside of our own True Income letter, there's very little written about how to invest in bonds. How can you get started without buying an expensive newsletter?

Now... Check out this website. It's the website for the Financial Industry Regulatory Authority (FINRA) - the brokerage industry's self-police. Among its other functions, FINRA keeps tabs on the bond market by collecting trading information.

Using the FINRA website, you can access market information on bonds by simply typing in the symbol of the company whose debt securities you're interested in. For example, you can choose to search for bonds by "symbol." So to look up Ford's bonds, I just punch in "F" - and, presto, all of Ford's bonds that have traded recently will appear.

What's my best advice on bonds? First, never buy a bond unless you're certain the collateral value of the bond will cover 100% of the debt. Just like you wouldn't make a loan to a stranger without collateral, likewise you shouldn't lend to corporations without coverage.

Second, make sure you're going to earn an interest rate that's commensurate with the risk of default. Even if you're protected by collateral, you don't want your money stuck in a bankrupt bond for 24 months without getting any interest. So if you think a company might be in trouble, make sure you're getting paid a high rate of interest.

Finally, I'd never buy a corporate bond at anything near par (usually $100). Why? That's one of the big secrets of the bond market...

At least once every 10 years, investors dump corporate bonds en masse. When they do, you will have the opportunity to buy safe corporate bonds for around 50 cents on the dollar. That means you'll get a big capital gain when the company redeems the bond at par ($100), and it means the yield you'll earn for the duration of the bond will be 100% bigger than normal.

Think about it. If you buy a 10-year bond at par ($100) that's paying a $10 coupon, you'll earn 10% a year for the duration of the bond. At the end of 10 years, you'll have earned $100 in interest. And you'll get $100 in capital returned as well. Your $100 has turned into $200 - that's a 100% gain.

But... imagine if you bought the same bond for $50. You'd still get $10 a year for 10 years. And you'd get $100 when the bond was due. Your $50 would turn into $200. That's a 300% gain. Buying corporate bonds at a big discount is both vastly more profitable and much safer. (You obviously don't need as much collateral to protect you if you're buying a bond at 50 cents on the dollar.)

Just to reiterate what I told you on Wednesday, bonds are vastly safer than stocks. They can make you a tremendous amount of money - if you have the discipline to wait and only buy when bonds offer safety, high yields, and significant capital gains.

source HERE

DUBAI (Zawya Dow Jones)--Dubai said Monday that it has received $10 billion in financing from Abu Dhabi, which will pay part of the debt held by conglomerate Dubai World and its property unit Nakheel.

Out of this, $4.1 billion will be used to repay Nakheel's Islamic bond, or sukuk, that matures Monday. The remainder of the funds will be used to finance Dubai World's needs up until the end of April 2010.

"We are here today to reassure investors, financial and trade creditors, employees, and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices," Sheikh Ahmed bin Saaed al-Maktoum said in a statement.

Dubai rocked world markets in late November when it requested a freeze on debt payments by Dubai World in order to restructure the conglomerate. Nakheel's bond had been seen by many as a litmus test for Dubai's ability to repay more than $80 billion of government and corporate debt.

"I think Abu Dhabi saw the adverse market reaction to Nakheel debt restructuring news play out over several days and perhaps decided they had seen enough," said Saud Masud, senior real estate analyst at UBS AG.

Talk that Nakheel could reach a positive outcome helped boost shares in Dubai on Sunday.

The Dubai Financial Market's main index closed up 3.3% at 1695.35, extending Thursday's 7% rally. However, the benchmark is still down about 19% since Dubai World requested the debt freeze.

"This is very positive news, and will be welcomed relief to bondholders in particular. We are expecting a strong positive reaction to U.A.E. and regional markets," said Ali Khan, managing director at Arqaam Capital. "Details yet to emerge, however headline is very positive."

In its statement, Dubai said it will focus on addressing the concerns of Dubai World's creditors and will start discussions with creditors and contractors shortly.

source HERE

By Susan C. Walker
Fri, 20 Nov 2009 15:45:00 ET

Successful US$4.5bil bonds and sukuk issue by Petronas to lead the way

PETALING JAYA: The successful issuance of US$4.5bil conventional bonds and sukuk by Petroliam Nasional Bhd (Petronas) could see large companies tapping the dollar bond market.

Analysts said large companies with high enough credit ratings and were well-known internationally would attract sufficient interest.

“Investors are still picky and concerned. They are picking well-established names and Petronas is one of them,” said Malaysian Rating Corp Bhd vice-president of fixed income research Wan Murezani Wan Mohamad.

“The concern right now is for capital preservation.’’

Petronas’ US$1.5bil sukuk and US$3bil conventional bonds made their debut on Bursa Malaysia and Labuan International Financial Exchange (LFX) respectively on Aug 14. Both securities have a tenure of five and 10 years respectively.

The bonds by Petronas were the largest issuance in Asia over the past five years and the second largest in Asian history. The size of the offering was increased due to high demand. The order book of US$19bil was the largest reported order book ever for an Asian transaction.

The money raised for Petronas was to fund its capital expenditure and operations.

Petronas sold US$4.5bil of bonds at a yield of 162.5 basis points above US treasuries.

Liquidity in the global markets continue to rise on historical low interest rates and huge stimulus programmes initiated by governments to lift economies from a terrible recession that has gripped much of the world.

“As for ringgit-denominated bonds, demand is skewing to AA and above,’’ said Wan Murezani.

A fixed income analyst with a local investment bank said Petronas managed to raise a significant amount of money cheaply with the bond issue.

Although spreads have gone up recently, the price of Petronas’ dollar bonds has also risen.

The increase in spreads was explained by US treasuries rising at a faster rate than the Petronas bonds.

Analysts said that when a giant company such as Petronas made such a move to raise dollar-denominated bonds, it opened the doors for others to follow suit.

However, there is a slight caveat as there are not many companies in the country that have as strong a credit rating.

Furthermore, the deep and liquid ringgit bond market has been sufficient for many companies to raise their money.

“Malaysian credit is still well sought after,’’ said the analyst.

src

However, EW consider this as a wrong direction!

U.S. Dollar: Another Piece of the Puzzle?
Individual investors can be wrong about a market trend. But countries?