Can Malaysian corporate bonds reach RM100b despite pandemic disruptions?

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Malaysian Corporate Bonds and Sukuk Issuances Projected to Reach RM100 Billion Despite Pandemic Disruptions

The Securities Commission (SC) anticipates that the total issuance of Malaysian corporate bonds and sukuk will fall within the RM90 billion to RM100 billion range for the current year. This projection is being made even amidst the significant business disruptions stemming from the Covid-19 pandemic. Sukuk issuances are expected to continue their strong performance, maintaining their substantial share of the market.
Continued Dominance of Sukuk in Issuances

Over the past three years, sukuk instruments have consistently represented 70 per cent of all corporate issuances. The SC does not foresee any substantial shift in this proportion for the current year, underscoring the enduring demand for Syariah-compliant investment products within the Malaysian market. This trend reflects a deep and persistent pool of investors seeking Shariah-compliant avenues for their capital.
Islamic Finance's Role in Market Challenges

In response to prevailing market challenges, the SC is actively exploring opportunities within Islamic finance, with a particular focus on the Islamic capital market. There is an ongoing discourse regarding the alignment of Islamic finance principles with broader themes of sustainability and responsible investing. The SC is also facilitating the introduction of Wakaf-based collective investment schemes, aiming to enrich the landscape of social finance products available to investors.
Risk Assessment Amidst Economic Uncertainty

While the overall outlook for issuances remains robust, certain issuer segments may face elevated credit risks due to pandemic-induced uncertainties and slower global economic growth. Specifically, sectors such as aviation and oil and gas trading and services have been identified as potentially experiencing higher risks. These stressed segments currently constitute approximately eight per cent of total corporate bond issuances.
Mitigation Strategies for Stressed Issuers

Issuers within these identified high-risk segments might encounter short-term financial strain that could affect their credit standing. However, many of these entities are highly rated, with many holding AAA and AA ratings, which could serve as a buffer against outright default. In instances where default becomes a possibility, available options for investors include negotiating rescheduling or restructuring of the debt, or pursuing legal recourse based on contractual agreements.

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Can Malaysian corporate bonds reach RM100b despite pandemic disruptions?

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