KUALA LUMPUR: The maiden RM300 million sukuk from DanaInfra Nasional Bhd to partially fund the Klang Valley’s mass rapid transit (MRT) will kick-start retail trading of bonds on Bursa Malaysia and would also likely attract the issuance of private debt securities like conventional bonds and Malaysian Government Securities (MGS) made available to the public.
Bursa Malaysia Bhd CEO Tajuddin Atan said a number of parties have indicated they would issue retail bonds, adding that there should be ample amount of issuance for the successful trading of these bonds on the local exchange.
“The first issuance will be the starting point for further growth as it provides an additional, cost-effective method to raise capital as well as provide both domestic and foreign investors price transparency and flexible access to the stability of bonds and sukuk,” he said in a statement following the launch of the new exchange-traded bond and sukuk (ETBS) on the local bourse.
He, however, remained tightlipped about the parties interested and the amount of issuance in the coming months ahead. Prime Minister Najib Tun Razak yesterday launched the first tranche of retail ETBS with this maiden issue by DanaInfra, a move aimed at getting more participation from retail investors in bonds used for funding national infrastructure projects.
The total issue by DanaInfra for the current ETBS is RM1.5 billion for the first phase of the MRT Kajang-Sungai Buloh line, of which RM300 million is allotted for retail investors through ETBS. The balance of RM1.2 billion will be for institutional investors.
DanaInfra was established under the Ministry of Finance (MoF) in mid-2010 to facilitate the funding of large infrastructure projects by the government.
Najib said investors who have been buffeted by the financial crisis in Western markets can look to Islamic finance, which offers an alternative growth model, adding that no investment was without risk and this relatively young market will still have the occasional growing pains.
“Malaysia now accounts for three-quarters of the global sukuk market and we are a hub for issuing, trading, regulation, standards, marketing and training… Malaysia is now one of the few places in the world to offer retail investors the chance to participate in this fast-growing, fast-changing market,” he said.
Sukuk, the syariah-compliant Islamic bonds, has been gaining ground in the field of investment and Malaysia is a leading nation to attract such bond issues and investments.
The RM300 million retail sukuk, with a minimum investment of RM1,000, is guaranteed by the Malaysian government and the first issuance will take place on Feb 8. It will have a tenure of 10 years.
The sukuk will be listed on Bursa Malaysia and gives an opportunity for Malaysians to be a part of the MRT project, which has an estimated cost of RM23 billion.
Maybank Investment Bank Bhd, CIMB Investment Bank Bhd, RHB Investment Bank Bhd and AmInvestment Bank Bhd were appointed last year to handle DanaInfra’s maiden sukuk sale.
The yield for the retail sukuk, however, has yet to be determined. A book-building exercise targeting local investors will begin on the launch date and is expected to close two weeks after.
The government, in the budget last year, announced incentives for companies issuing bonds and sukuk. These include offering companies a double tax deduction for a period of four years for additional expenses incurred in such issuances.
Photo: (From left, front row) CIMB Group Holdings Bhd chief executive Nazir Razak exchanging documents with DanaInfra chairman Mat Noor Nawi as AmBank Group chairman Azman Hashim looks on. Also present are (from left, back row) RHB Investment Bank chairman MohamedKhadar Merican, Malayan Banking Bhd president and CEO Abdul Wahid Omar, Bursa Malaysia chairman Mohamed Dzaiddin Abdullah, Najib, Finance Minister II Ahmad Husni Mohamad Hanadzlah and Treasury secretary-general Mohd Irwan Serigar Abdullah at the launch of DanaInfra’s sukuk on Bursa Malaysia in Kuala Lumpur.