KUALA LUMPUR: With the normalisation of external conditions, a steadily recovering domestic economy and expectations that Bank Negara Malaysia (BNM) will keep its benchmark rates intact until the second half of 2010, RAM Ratings Bhd believes that it is an opportune time for corporates to raise funds, whether for new funding, refinancing or building up their war chests.
"Conducive fund-raising conditions and a brighter economic outlook will also encourage corporates to seek additional funding to fuel their growth," its CEO Liza Mohd Noor said in a statement today.
She said the outlook on the bond market hinged on the ongoing rollout of the various stimulus packages and allocations under Budget 2010, which would require further fundings.
"We also expect government-related infrastructure projects and banks' capital-raising efforts to account for the bulk of the debt capital market's activity this year," Liza added. RAM Ratings expects Malaysia's gross domestic product (GDP) growth to come in at 4.9% in 2010.
In its report, RAM Ratings said the Malaysian debt capital market, which had experienced a dry spell in 2009, was set for a rebound this year following an uptick in bond-market activity since the second half of 2009 and as the economic recovery gains traction.
The ratings agency said given the uncertainties weighing down the health of the domestic economy throughout 2009, the market had only favoured debt papers with at least double-A ratings.
It said the rated value of newly issued private debt securities (PDS) totalled RM61 billion last year. Of this, RM46.9 billion was rated by RAM Ratings, translating into about 77% of the rated market.
"Nonetheless, actual fresh PDS issuance only amounted to RM20.8 billion — a 31.8% year-on-year (y-o-y) drop amid the bleak economic and investment landscape last year," it said. Looking ahead, however, RAM Ratings expects about RM55 billion–RM60 billion of gross corporate and sukuk issues in 2010.
RAM Ratings said the much-awaited debut of PDS issues with a financial guarantee or Al-Kafalah guarantee from Danajamin Nasional Bhd (AAA/Stable/-) would boost the growth momentum of the bond market.
It has been reported that Danajamin has already received four applications to extend guarantees to RM1 billion of bonds, with another 30 applications in the pipeline and a potential issuance value of RM8.4 billion.
RAM Ratings said banks, which had tightened their credit policies at the height of the global financial turbulence, had now returned to the market with competitive borrowing rates while balancing their risks with a very selective clientele of good credits.
"While we acknowledge that bank loans have traditionally been the primary source of funding for the corporate sector, we believe that it is essential for corporates to maintain some diversification in their funding options," RAM Ratings deputy CEO Chong Kwee Siong said.
RAM Ratings has a favourable view of rubber-glove manufacturers and also support services for the oil and gas sector.
"We remain upbeat that companies that operate predominantly in Malaysia will enjoy stable demand as Petroliam Nasional Bhd (Petronas) has reaffirmed its upstream commitments up to 2012. We also note that rubber-glove makers have been largely unaffected by the recent economic crisis, given the products' non-cyclical nature.
Meanwhile, RAM Ratings said CIMB Investment Bank Bhd (CIMB IB) took the top spot in the RAM League Table for 2009 — in terms of both programme value and number of issues; AmInvestment Bank Bhd came in second ahead of RHB Investment Bank Bhd in terms of programme value.
CIMB IB also retained its pole position in the RAM League Table for Sukuk Issues in 2009, with a programme value of RM26.5 billion and four issues under its belt.