KUALA LUMPUR (April 16): The Securities Commission Malaysia (SC) expects the country’s 2020 corporate bonds and sukuk issuance to be between RM90 billion and RM100 billion, compared with RM132.82 billion in 2019, as the Covid-19 pandemic and the resultant disruption on businesses affected fundraising activities. 

SC deputy chief executive Datuk Zainal Izlan Zainal Abidin said the projection is based on feedback from the industry.

“The Covid-19 outbreak and the resultant disruption on businesses have affected fund raising activities. Therefore, it is actually more challenging for us to project the size of fundraising in the current environment.

“In terms of existing sukuk outstanding, if there is any non-payment of profit or principal arising from the current challenging operating landscape, it is very likely due to credit [position] rather than Shariah issues and therefore, it will be dealt with from a credit perspective just like conventional bonds,” Zainal Izlan said during a virtual media conference today, in conjunction with the SC’s 2019 annual report release.

According to Zainal Izlan, sukuk has accounted for 70% of corporate bond issuance in the country since 2017 and that the SC does not foresee any specific reason for this proportion to be significantly different in 2020, as there is large demand for Shariah compliant investment products.

He said the Islamic capital market presents significant opportunities during this critical period, backed by the alignment between the underlying principles of Islamic finance and sustainable and responsible investment (SRI).

The SC, he said, has been a key proponent of the convergence between the two segments of the financial industry.

“We believe that this will continue. Given the current environment, there is greater need for social projects to be funded — the Islamic finance and the Islamic capital market can certainly come into place. 

“Apart from SRI and SDG (sustainable development goals) bonds, we can also expect to see other innovations in the market,” he said.

According to the SC, some RM22.7 billion was raised through initial public offerings and issuance of corporate bonds and sukuk in the first quarter of 2020. Corporate bonds and sukuk accounted for 96.92% or RM22 billion of the total money raised, it said.