KUALA LUMPUR (July 15): The Securities Commission Malaysia says it believes there is a place for bonds and sukuk instruments to be part of a well diversified retail investment portfolio despite traditionally being regarded as being for the wholesale market.

Chairman Datuk Syed Zaid Albar said since the introduction of direct access to the fixed income instruments in 2012, retail investment had remained low as issuers continued to prefer issuing their papers in the wholesale market and in larger denominations.

He said issuers were also driven obviously by the ready availability of institutional demand in the primary market and the cost consideration to slice bonds into smaller denominations which is more appropriate for retail investors.

“In this regard, we believe investment in technology could help provide a potential solution,” he said during a special address for a one-day bond conference organised by RAM Holdings Bhd and Securities Industry Development Corporation here today.

Syed Zaid said the application of financial technology in bonds and the sukuk market has extended beyond distribution.

In some countries, distributed ledger technology is already being utilised, he said, citing the launch of blockchain bonds by the World Bank and Commonwealth Bank of Australia in August 2018.

From a buying side perspective, advances in Artificial Intelligence and analytics have also driven better trading decisions as well as efficiency in terms of pricing, with the speed lowering transaction costs, he said.

On another note, he said financing activities in the corporate bonds and sukuk market in Malaysia have remained relatively resilient, with RM78.4 billion raised in the first six months this year and the total amounting to RM1.49 trillion as at end-June this year.

Meanwhile, RAM Holdings chairman Tan Sri Amirsham Abdul Aziz said the Malaysian bond and sukuk market continued to demonstrate its importance as a key pillar in the capital market, financing the real economy and the infrastructure needs of the country.

Over a span of 18 years the market grew from RM264 billion in 2000 to RM1.4 trillion as at end-December 2018.

The bond markets have remained healthy so far this year, despite the volatility in the broader market with gross corporate issuance activities expected to reach between RM90 billion and RM100 billion by the end of this year, not too far away from the RM105.4 billion achieved last year, he added.