Business

Monday April 20, 2009

South Koreans keen on ringgit bonds

By YEOW POOI LING


It shows that Malaysia still an attractive market

MALAYSIA remains an attractive financial market in the region to raise funds, says RAM Rating Services Bhd deputy chief executive officer Chong Kwee Siong.

He said many South Korean companies were coming to Malaysia to issue ringgit-denominated bonds to raise funds.

“The fact that South Korean companies are coming to Malaysia to tap the bond market gives you an idea of the relative attractiveness of the Malaysian market,” he told StarBiz.

Typically, South Korean companies will issue bonds in local currency and swap to the US dollar or won to repatriate the funds.

Based on credit ratings given by Standard & Poor’s (S&P) and Fitch Ratings, Malaysia stands relatively strong against its peers like Thailand, Indonesia and Vietnam.

It was reported last week that S&P had cut Taiwan’s credit rating outlook to account for the island government’s debt burden and banking system.

Meanwhile, Thailand’s local currency rating was reduced to A- from A previously as confidence had dwindled significantly amidst the chaos in the country’s capital.

While RAM did not evaluate credit ratings of countries, Chong said Malaysia was unlikely to face difficulty in financing its enlarged budget deficit this year via government securities, given the ample liquidity in the domestic market.

About RM70bil to RM80bil in bonds is likely to be issued this year for Government expenditure as well as to refinance maturing debt papers.

Chong said the country’s excess liquidity was some RM200bil, giving much leeway to meet the burgeoning supply of debt papers.

“High-quality corporate issuers will also see demand for their bonds,” he said.

The Finance Ministry complex in Putrajaya. Malaysia’s excess liquidity of some RM200bil will give much leeway to meet the country’s burgeoning supply of debt papers.

While defaults happen in both good and bad times, the risk tends to be higher during the downturn.

“Certain sectors will suffer more than the rest such as exports, manufacturing, electrical and property,” he said.

He said credit rating of companies would differ, subject to their business models, noting that some businesses had excessive debts.

A downgrade does not mean the company will default. It is just a reflection of the change to the risk profile of the business.


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