KUALA LUMPUR: Malaysia's corporate bond and sukuk issuances are estimated to remain between RM100 billion and RM110 billion in 2021, at a similar level with 2020, based on the narrative of re-building the nation in these challenging times.
Malaysian Rating Corporation Bhd group chief executive officer Datuk Jamaludin Nasir said as global rates were expected to remain low this year, appetite for higher yielding instruments such as sukuk should remain strong.
He added that this was going to be backed by firmer crude oil prices, accommodative policies for Islamic finance and expectations for economic recovery.
"For 2021, we believe that sukuk will continue to play a dominant role in Malaysia's debt market," he said during his speech at MARC Malaysia Bond and Sukuk Conference 2021 today.
Jamaludin said the global sukuk market was expected to grow in 2021 amid the deployment of vaccination programmes and the resumption of economic activities.
He said year to date, the total outstanding sukuk issued by Malaysian entities amounted to US$286.8 billion or an equivalent of 39.6 per cent of total global outstanding.
This places Malaysia well ahead of Saudi Arabia's US$163.7 billion and Indonesia's US$100.5 billion.
"Sukuk issued by Malaysia have also gained traction among foreign investors, evidenced by the recent issuance of the US$1.3 billion US dollar sustainability sukuk which recorded a bid-to-cover ratio of 6.4x," he said.
Meanwhile, the Securities Commission chairman Datuk Syed Zaid Albar said there was a need to broaden the credit spectrum to include smaller bond issuers.
This is given the significant contribution of micro, small and medium enterprises (MSMEs) to gross domestic product (GDP) and employment.
He said while the domestic bond market had grown to RM1.6 trillion in 2020 from RM1.49 trillion in 2019, despite the challenging environment, more needed to be done for growth to be sustainable.
"The challenge is adapting the bond and sukuk markets to provide cost-effective means for small and lower-rated issuers to raise funds to meet their growth and expansion plans.
"This is particularly important because the greater or more inventive use of traditional assets alone will not be enough to foster better growth," he said.
Syed Zaid added that looking ahead, the overall landscape would likely continue to be uncertain with the after effects felt long after the pandemic has ended.
"God willing, these challenges will pass, especially since we do have the fortitude and agility to capitalise on the waves to recovery and growth," he added.