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KUALA LUMPUR: Domestic issuance of corporate bonds is expected to see flat to marginal growth in 2015 of about RM80 billion to RM90 billion from RM85 billion expected this year, said Malaysian Rating Corp Bhd (MARC) chief executive officer (CEO) Mohd Razlan Mohamed.

Total corporate bond issuance stood at RM70.7 billion, RM123.8 billion and RM86.2 billion in 2011, 2012 and 2013 respectively.

“As a credit rating agency, we are still bullish on the bond market. We see continuous demand for funding to support infrastructure projects, while the local market is flushed with liquidity,” he told reporters on the sidelines of the MARC 2014 CEO Forum here yesterday.

From January to September this year, total issuance of domestic-rated corporate bonds stood at RM64 billion.

“There will be some caution headwinds ahead, especially from the domestic front and property market, as well as the risk of global impact on Malaysia, but our market will sustain,” said Mohd Razlan, adding that he doesn’t foresee any drastic reduction in capital market activities.

Traditionally, corporate bonds issued under Islamic principles or sukuk account for 60% of total issuance and the remaining 40% come from conventional bonds.

MARC also expects Malaysia’s economic growth to slow next year to 5%, compared with a gross domestic product growth (GDP) forecast of 5.8% in 2014.

MARC associate director and chief economist Nor Zahidi Alias said the slower economic growth forecast for 2015 is mainly due to lower private consumption growth, challenges such as the implementation of the goods and services tax and subsidy rationalisation programme.

“If we want to achieve GDP growth of 5.5%, the rule of thumb is to achieve private consumption growth of 7%. I don’t think we are going to get that in 2015,” he said.

The rating agency is projecting a private consumption growth of 5.2% for 2015.

Nor Zahidi also highlighted that the only contributing factor that was holding up the local economy in the third quarter of this year was private consumption, which grew at 6.5% year-on-year.

 

This article first appeared in The Edge Financial Daily, on November 19, 2014.

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