November 6, 2017 / 11:06 AM / a year ago

Malaysia to liberalise bond market to draw retail investors

* Capital markets regulator plans to ease rules in Q1 next year

* To review new issuances, existing bonds traded in wholesale mkt

By Liz Lee

KUALA LUMPUR, Nov 6 (Reuters) - Malaysia will liberalise regulation around bond issuance early next year to boost retail participation in the bond and sukuk markets typically dominated by high-net worth individuals and institutional investors, the capital markets regulator said.

The Securities Commission Malaysia (SC) said on Monday it would liberalise rules by the first quarter of 2018.

“This involves reviewing the primary market issuance processes and disclosure requirements, as well as expanding the range of corporate bonds and sukuk offered to retail investors,” SC Chairman Ranjit Ajit Singh said.

The regulator will also review the secondary market to enable retail access to existing bonds traded in the wholesale market.

To spur interest and better understanding of the bond market, the regulator launched the Bond+Sukuk Information Exchange (BIX), a centralised information platform on Monday, which consolidates bond and sukuk prices and credit information.

BIX Chairman Lee Kok Kwan said with the high savings rate in Malaysia, opening up the bond market to retail investors will help to better channel domestic savings into more productive sectors of the economy.

“For individuals who want to invest for the medium to long term, this fixed income asset class gives a much higher mathematical certainty in terms of total returns, over time,” he told Reuters.

The Southeast Asian country has a gross savings rate of 30 percent, as a share of gross domestic product (GDP) in June this year, according to CEIC Data.

Malaysia’s 1.3 trillion ringgit ($306.7 billion) bond and sukuk market is the third largest in Asia, relative to GDP. It is the largest sukuk market in the world.

Maybank Investment Bank fixed income research analyst Winson Phoon said the regulator’s relaxation of rules to increase retail participation is a welcomed move for the bond market.

“The local corporate bond market is well established and quite mature, but will further benefit from increased diversity in terms of issuers, bond structures and credit spectrums. Having a new pool of retail investors...will perhaps attract more issuers to the market,” he said.

Mohammad Hasif Murad, investment manager at Aberdeen Islamic Asset Management, said local investors may lack sophistication to invest in bonds given the more complex structure. But he said the market could be robust if both retail and institutional bond sizes are reduced to improve liquidity.

$1 = 4.2390 ringgit Editing by Jacqueline Wong

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