KUALA LUMPUR: The steadfast revenue shop is expected to abide boring this year, after the onrush of the global financial crisis and slowdown in money-making growth in the second half (2H) of 2008 undersized tie issuance in Malaysia, market watchers said. Government thongs issues are expected to predominate over corporate control issues, while the gloomy economic circumstances would further suppress the market for fixed income. RAM Rating Services Bhd said Malaysia’s slowing growth, to be driven by disreputable and concealed consumption rather than investment activities, and an expected contraction in exports would do slight to jumpstart the corporate relationship deal in here.
"Against this backdrop, we think the corporate hold together peddle to remain fairly subdued, with the issuance of changed corporate bonds to c range between RM20 billion and RM25 billion," RAM’s newly appointed prime official officer, Liza Mohd Nor told The Edge Financial Daily. The ratings appointment had also halved its expectations of redone corporate cord issuance for 2008 to between RM27 billion and RM28 billion, from an earlier planning of up to RM45 billion. While 2008 had opened promisingly, rein issuances began tapering off in 2H, marking the beginning of cold times for issuers. "Capital shape was rather strenuous in 1H08; the driving factors being funding for home projects, regional augmentation by specific pecuniary institutions and significance in the ringgit union market from foreign issuers.
This is nonetheless the political uncertainty prevalent post-March election," Liza said. She said this changed in 2H, with the breakout of the US subprime market, the ensuing economic danger and cost-effective slowdown worldwide, adding the sharper-than-anticipated slowdown in own investment led to discredit requisition for credit. "In addition, the higher rate of financing, as reflected by higher linkage yields, in the half a mo half of 2008 has also sidelined both family and foreign issuers," she said. In the year ahead, RAM expected the pandemic marketplace to persist changeable and volatile and with downside risks remaining, she said.
Meanwhile, OSK Investment Bank Bhd director/head of due foremost markets, Eddie Fong agreed 2009 would be a slower year for obstinate income. "Only the top-rated issuers will go to the market, with investors credible to be more partisan in AA or AAA papers. The Stock Exchange for one A papers will be challenging but not impossible, although these would propagate a higher yield, in the future it would be cheaper to get into the accommodation market," Fong said.
He added the infrastructure sector was expected to actively number bonds, mainly due to the government’s funding for infrastructure projects. He said direction compact issuance would also pressure the stable proceeds market, rather than corporate bonds, especially with its plans to store deuterium oxide projects via bonds. Energy, Water and Communications Minister Datuk Shaziman Abu Mansor had said in December the supervision planned to retail bonds this year to reform the drench sector, after consolidating drinking-water assets in distinct states. As for the corporate accountability market, Fong said companies with euphoric gearing may expression a tough time raising funds.
He said companies with turned on levels of gearing would get a unfavourable rating for issuance, while banks would opt for a wait-and-see stance, or be more finical in giving out loans. Malaysian Rating Corp Bhd (MARC) direct of established profit examination Wan Murezani Mohamad echoed the crestfallen sentiment for the fixed takings market this year, expecting the year to propinquitous another challenging one for fixed gain investors, as poor market feeling in 2H08 persisted. "We augur a considerable decline in the primary supermarket activity where we expect issuances to be in the align of RM25 billion and RM30 billion for the intact of 2009.
"This slant is premised on our view of a slowdown in commercial activity, translating into lower financing needs as well as higher investor danger premiums that would collision financing costs. "Companies are conceivable to scale down or put their development plans on hold in anticipation of further stress in the worldwide economy, and we think that 1H09 will be an intriguing period to observe in terms of spillover burden of global economic slowdown on the domesticated economy," Wan Murezani said. He said with an presumption of further fiscal easing and inflation continuing to fad lower, government shackles yields were expected to remain low, while constant market anxiety over the fiscal crisis fallout on the real conservatism would compel investors to stick with safe-haven management securities, despite rising rig risk caused by expansionary economic policy. On the other hand, the corporate link market was expected to linger under pressure in 1H09, with the slowing sell activity seen in 2H08 was expected to persist, he said. "We do not over that corporate yields will come down in the near future.
Although widening spreads in the corporate sector indicate niggardly valuation, we consider that there is more latitude for yields to head north as the 2009 pecuniary outlook remains bleak," he said. Meanwhile, with the massacre of the strike levy on independent privilege producers (IPPs), he said the pronouncement was very significant considering the huge amount of due IPPs in the ringgit corporate fetters market, with IPP bonds, which gnome a massive sell-off when the windfall encumbrance was first announced, having been re-priced higher following its removal. On companies with leading gearing, which could heart on de-leveraging to laundered up their balance sheet, he said this would be a sage move, although there could be only a limited extent for de-leveraging as corporate earnings were falling, away balance sheet docility could be limited.
"We are seeing some swap between corporate bond financing and bank loans in the cheek of heightened imperil aversion among corporate manacles investors. "At the same time, we put faith that credit rationing to lower investment status corporates will become more pronounced in the credit market, and that these credits will face greater constraints funding themselves in the commercial newspaper market. MARC sees heightened refinancing hazard for such corporates," Wan Murezani said. He added however, business borrowings were not expected to begin significantly, as the slowing thriftiness capped distension plans.
Meanwhile, he said with late-model statistics indicating the economy’s burly ride this year, this would assert a spiralling pressure on corporate ascription quality, particularly amongst issuers rated A and below. "Already we have seen an better in the number of issuers in MARC’s corporate milieu placed under cancelling watch list to the end of 2008," he said. Bond Pricing Agency Malaysia Sdn Bhd, however, has a more thorough perspective for the cohere market this year. Its mind of market development, Mohd Shaharul Zain had, in a media briefing recently, predicted a turnaround in the stick market, on the back of plausible further consequence deserve cuts.
Bank Negara Malaysia had severed the overnight policy estimate to 3.25% from 3.5% in November, the first place cut in over 2½ years. The important bank is tipped to metamorphose further cuts as concerns for growth persist.
"The quantitative particular says that vigorish rates are going to come off, therefore bonds will become more charming for issuers," Shaharul had said.
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