KUALA LUMPUR Feb 23 (Reuters) – Malaysia’s DanaInfra
Nasional Bhd, created by the finance ministry to raise funds for
the country’s largest infrastructure project, may issue and list
on the stock exchange this year as many as two Islamic bonds
worth 100 million ringgit ($30.4 million) each, an official with
the bourse said.
“We are in engagement with them, and definitely we will see
at least one or two issuances this year,” Jamaluddin Nor
Mohamad, head of Islamic and alternative markets at Bursa
Malaysia, said in an interview.
The expected issuance is necessary to promote Bursa Malaysia
as a market for retail sukuk, he said. DanaInfra is so far the
only institution to have issued sukuk on the bourse’s Exchange
Traded Bonds and Sukuk (ETBS) platform.
DanaInfra raised 300 million ringgit with a 10-year sukuk in
January 2013 and 100 million ringgit with a 15-year sukuk in
October. The issues targeted retail and corporate investors with
limited access to the over-the-counter market in bonds, where
investments must be done in large minimum sums.
Proceeds of DanaInfra’s issues go towards extending the Mass
Rapid Transit network to cover the Klang Valley and Kuala Lumpur
conurbation.
NEGATIVE PERCEPTION
DanaInfra’s sukuk issues this year will serve to correct a
“negative perception” that ETBS bonds are more costly than
raising funds on the OTC bond market and equity market,
Jamaluddin said. DanaInfra’s debut sukuk, the first on ETBS and
an entirely new type of product, had to be priced at a premium
to attract investors.
“It was a one-time decision by the issuer for the inaugural
issue. The message we are sending out is that premium pricing is
not the only way out, or you don’t have to go down that road.”
DanaInfra’s second sukuk, priced based on OTC rates, was
oversubscribed 2.19 times. Bursa Malaysia is now courting
several financial institutions and government-related agencies
to be issuers on ETBS.
“We continue to engage corporates on a direct basis, and
explain all these intricacies and also put forward the
incentives that have been put in place by the government.”
Issuers enjoy a double deduction on expenses and are
exempted from stamp duty until 2015. “What we want to achieve
here might not be reflected in monetary benefit on an immediate
basis – this is a long-term commitment,” Jamaluddin said.
RETAIL INTEREST
Malaysia’s Securities Commission launched a framework in
September 2012 for retail investors to buy into bonds and sukuk.
ETBS offers an opportunity for retail investors to
diversify, although its new nature means it is often evaluated
in the same way a stock would be, said Jamaluddin. “They are
going back to typical equity-type thinking, chasing yields.”
DanaInfra, in an emailed statement to Reuters, said the
major challenges had been educating retail investors about the
general structure of sukuk, and the net benefit of investing in
DanaInfra relative to other products.
Retail investors took smaller portions of DanaInfra’s sukuk
than institutional buyers. “We expect issuances in the immediate
future to still be driven by institutional investors,
nevertheless retail demand may gather momentum,” said DanaInfra.
Maybank, CIMB Group Holdings, RHB
Investment Bank and AmInvestment Bank –
lead arrangers or market-makers for the DanaInfra sukuk – have
been informing retail investors about ETBS. “These things will
enhance the ability to attract investors on the coming
issuances,” said Jamaluddin.
“ETBS is still in its infancy stage as an investment
product, the education and development of the market still has a
long way to go,” said DanaInfra.
($1 = 3.3070 Malaysian ringgit)
(Editing by Andrew Torchia)