Malayan Banking Bhd., Malaysia’s top lender, is anticipating bond sales driven by big Southeast Asian infrastructure projects to offset a downturn in fees from sluggish regional equity markets.

The Kuala Lumpur-based firm, Southeast Asia’s top arranger of bond sales this year, has a “robust” pipeline of fixed-income deals, Michael Oh-Lau, Maybank’s regional head of debt capital markets, said in a Thursday interview in Singapore. Conversely, fees from managing equity capital market deals slumped as much as 70 percent for banks in the region in the first quarter, said John Chong, chief executive officer of Maybank’s investment-banking unit.

“This year looks quite promising for debt financing,” Chong said in the same interview. “Where it is started on a slow track is on the equity capital market side.”

Maybank’s view illustrates the optimism in Southeast Asia’s debt markets where local-currency bond sales have climbed 10 percent this year to $15.1 billion from a year ago, a contrast to a 96 percent slump in the value of equity offerings, data compiled by Bloomberg show. Low valuations are among reasons why companies are avoiding raising capital in regional equity markets, Chong said.

Islamic Bonds

The bank is the top manager for local-currency bond sales in Southeast Asia this year with deals valued at $1.67 billion, or an 11 percent share of the market, the data show. It’s currently ahead of CIMB Group Holdings Bhd., which led regional bond sales in each of the past five years, according to the data.

The biggest deal Maybank handled this year was a 2.2 billion ringgit ($565 billion) perpetual sukuk for palm-oil producer Sime Darby Bhd., for which the bank is the sole principal adviser, lead arranger and manager, it said in a March 24 statement. Islamic bonds, or sukuk, are debt instruments that comply with Shariah law, which prohibits the payment of interest.

“We see a good first quarter, we bounced back quite strongly,” said Oh-Lau. “The intention is to maintain the momentum. We are continuously building the pipeline for the second half and next year as well.”

Maybank is looking to capitalize on the $110 billion the Asian Development Bank estimates Southeast Asian nations will spend on infrastructure projects by 2025, Chong said. Indonesia’s investment board estimates the state budget can only provide about 30 percent of the $450 billion needed for roads, railways, ports and power stations.

Maybank is looking to export its experience in Malaysia’s sukuk market to Indonesia, where the bank sees potential in financing infrastructure projects using Islamic products, Chong and Oh-Lau said.

The lender helped arrange power producer Tenaga Nasional Bhd.’s 8.98 billion ringgit of sukuk in November via its Jimah Power East Sdn. unit, and a 1.5 billion ringgit bond sale by West Coast Expressway Sdn., which is building a 233-kilometer highway connecting the west coast of the Malaysian peninsula, the bank said.

Maybank shares rose 0.1 percent to 9.16 ringgit as of the trading break in Kuala Lumpur on Friday. The stock is up 9 percent this year, compared with the Bloomberg Asia-Pacific Banks Index’s 6.7 percent loss.

Source:
courtesy of BLOOMBERG

by Chanyaporn Chanjaroen & Pooi Koon Chong

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