Published August 11, 2009

Zeti recommends Malaysia govt sell global bonds

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(KUALA LUMPUR) Malaysia's central bank has recommended that the government sell new global bonds, governor Zeti Akhtar Aziz said in Kuala Lumpur yesterday.

Ms Zeti: Decision will be based on cost effectiveness and needs

'We have always recommended for the government to enter the market,' Ms Zeti said at an event marking the sale of Petroliam Nasional Bhd's US$4.5 billion in Islamic and conventional bonds.

'The government decision will be based on the cost effectiveness and the requirements that we have,' she said.

Malaysia's government raised US$600 million in the first overseas sale of sukuk, or Islamic bonds, in 2002.

The five-year bonds matured in July 2007. The country in 2001 sold US$1 billion of global bonds maturing in 2011, expanding the size to US$1.75 billion in March 2002.

The central bank said yesterday that any foreign currency denominated bonds issued out of Malaysia will be called Emas, or gold, bonds, to 'provide greater visibility to the Malaysian market for the raising of funds by local and foreign corporations'.

This month's bond sale by Petroliam Nasional, Malaysia's state oil company, was oversubscribed by more than four times, and the first to be given the Emas designation, according to the central bank.

Bank Negara Malaysia has made the recommendation to the government to sell global bonds 'for more than a year', Ms Zeti said.

'It depends on market conditions which are highly dynamic.'

The decision would be made by the government, depending on cost effectiveness, and 'there is a lot of liquidity in the market' now, she said.

Malaysia accounts for 62 per cent of total outstanding global sukuk, the central bank said.

Islamic bonds are typically secured by real estate and assets that produce income or profits to pay investors.

Ms Zeti said in May that Malaysia does not rule out selling a second global Islamic bond so the country has a 'benchmark issuance', and that in order for there to be 'sufficient liquidity', the sale would ideally need to be at least US$1 billion. -- Bloomberg