Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on March 19, 2019

PUTRAJAYA: The government will seriously consider issuance of more yen-denominated bonds, which are commonly known as Samurai bonds, if Malaysia is able to obtain similar cost of 0.63% for the ¥200 billion (RM7.3 billion) bond issued last month, said Finance Minister Lim Guan Eng.

“If [the Japanese government] is willing to give similar rates, definitely it will be considered very seriously,” Guan Eng said during a ceremony commemorating the Malaysian government’s successful issuance of the ¥200 billion Samurai bond.

Guan Eng was responding to questions on whether the Malaysian government has plans for more Samurai bonds in the pipeline.

At 0.63% annual cost, the 10-year Samurai bond issued on Feb 7 and 8 is the cheapest across Asean presently, beating the 0.99% coupon rate obtained by the Philippines for its own ¥40.8 billion 10-year Samurai bond issued in August last year.

For Malaysia, the annual cost comprises 0.53% coupon rate, and a 0.1% guarantee fee to Japan-owned Japan Bank for International Cooperation, which guaranteed the bond. Lead arrangers comprised Mizuho Bank (M) Bhd, HSBC Bank Malaysia Bhd and Daiwa Markets Singapore Ltd in partnership with Affin Hwang Investment Bank.

Ambassador of Japan to Malaysia Dr Makio Miyagawa, who was also present at the ceremony, told reporters that the Japanese government is always ready to help Malaysia issue more bonds in the future if Malaysia would like to do so.

“Of course, at similar rates,” Miyagawa said. “We believe the Malaysian government is now moving towards the right direction in reducing debt and cleaning up its tasks. For this purpose, we are very happy to help the Malaysian government and the Malaysian people.”

Commenting on the low coupon rate, Miyagawa pointed to “good negotiating tactics of the new government” of Malaysia, without elaborating.

Malaysia’s successful issuance of the Samurai bond marks its return to the yen bond market after a 30-year absence, following three visits by Tun Dr Mahathir Mohamad since his return as prime minister in May last year.

Dr Mahathir, who told reporters in July last year that the Malaysian government would borrow “as much as we can” from Japan, said in November 2018 the yen credit came with no strings attached.

He also denied speculation that the government will give Japan preference to undertake infrastructure projects in the country.

The ¥200 billion raised will be used to fund infrastructure projects as underlined in National Budget 2019. “When we have funds for development projects, it will free up the other sources of revenue to pay up the [national] debt,” Guan Eng explained.

Aside from Japan, China has also offered to help Malaysia issue yuan-denominated Panda bonds. The Philippines was the first Asean country to issue such debt paper in March 2018, at 1.46 billion yuan and a 5% coupon rate.

According to Budget 2019, Malaysia’s debt service charges are projected to rise to RM33 billion or 12.6% of public revenue in 2019 from RM30.88 billion in 2018. Refinancing the existing debts with lower interest rate borrowing will help lighten the government’s burden, said economists.

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