2013年-世界发展银行全球_Malaysia___Bond_Market_Development_27页_1012kb

Summary of Malaysia Bond Market Development (Technical Note, January 2013)

Core Content

This document provides an in-depth analysis of the development and challenges of Malaysia's bond market, focusing on the role of government interventions, the composition of the investor base, and the structure of market infrastructure. It outlines the current state of the market, identifies key issues, and proposes recommendations to enhance market efficiency, diversity, and accessibility.

Main Points and Key Information

1. Overview of the Bond Market Development

• Malaysia has made significant progress in developing its capital markets, particularly the bond market, over the past decade.
• The Capital Market Masterplan 1 (CMP 1) played a central role in guiding this growth.
• The bond market has become a vital source of corporate funding, with both the government and private sector benefiting from its expansion.

2. Government Securities

• The government bond market is well-developed, with clear benchmark issues across various tenors (3, 5, 7, 10, and 20 years).
• Government bonds are actively traded, with daily trading volumes around MYR 1–2 billion and spreads between 5–10 bps.
• Government securities are not seen as crowding out private debt securities, and the ratio of government to private debt securities is relatively low.

3. Private Debt Securities

• The issuance of private debt securities has grown significantly since the 2000/2001 regulatory reforms.
• The financial sector is the largest contributor to the private debt securities market, followed by infrastructure, construction, and housing finance.
• Sukuk (Islamic bonds) make up 60% of total bond issuance in Malaysia and 60% of global Sukuk issuance.
• The market is highly concentrated in AAA and AA rated instruments, with 90% of outstanding bonds falling into these categories.
• Medium-sized companies and lower-rated issuers face challenges in accessing the bond market due to investor risk aversion.

4. Investor Base

• Pension funds and social security institutions are the largest institutional investors in the bond market, with the Employee Provident Fund (EPF) being the dominant player.
• EPF manages MYR 569 billion in assets and holds 64% of its portfolio in fixed income instruments.
• Life insurers are also major investors, with 73% of their total investment portfolio in fixed income.
• Banks and foreign investors primarily invest in sovereign or near-sovereign securities, and foreign participation in the private debt market is limited.

5. Market Infrastructure

• The bond market has a strong primary market infrastructure, supported by the Fully Automated System for Issuing/Tendering (FAST), managed by Bank Negara Malaysia (BNM).
• The market is predominantly over-the-counter (OTC), with all trades reported to Bursa Malaysia and settled through RENTAS.
• Bursa Malaysia's Electronic Trading Platform (ETP) is used for post-trade transparency but not for actual trading.

Issues & Recommendations

1. Access to the Bond Market

• Issue: The market is dominated by large, highly-rated companies and government-linked companies (GLCs), limiting access for medium-sized and lower-rated firms.
• Recommendation: Encourage medium-sized companies to access the bond market through partial guarantees, sponsorship, and reduced issuance costs.

2. Liquidity and Price Discovery

• Issue: Liquidity is concentrated in high-grade instruments, and price discovery is limited, especially for private debt securities.
• Recommendation: Develop open, independent electronic trading platforms that integrate price search, negotiation, and trading. Encourage competition among platforms and ensure timely and accurate trade reporting.

3. Supervisory Framework

• Issue: There is an imbalance in regulatory oversight between BNM and Securities Commission (SC), with BNM overseeing more parts of the market.
• Recommendation: Consider delegating secondary market supervision to SC to ensure clear homogeneity and optimal oversight. Explore the possibility of establishing a self-regulatory organization (SRO) for the bond market.

4. Investor Behavior and Risk Perception

• Issue: Investors are risk-averse in fixed income, with a preference for high-grade instruments.
• Recommendation: Encourage government-backed institutional investors like EPF to allocate mandates to independent asset managers to increase demand for high-yield bonds. Promote product education to change the perception of fixed income funds.

5. Product Diversity and Market Inclusion

• Issue: The mutual fund industry is heavily biased toward equity funds, with only 10% of total industry assets in fixed income funds.
• Recommendation: Increase the proportion of fixed income funds in the market. Encourage retail bond programs and product education to expand the investor base.

6. Transparency and Information Access

• Issue: Pre-trade transparency is limited, especially for illiquid securities, and information search costs are high.
• Recommendation: Improve pre-trade transparency and information availability. Evaluate the effectiveness of Bursa Malaysia's ETP and consider alternative models.

Conclusion

• To become a developed market by 2020, Malaysia must enhance market diversity, increase transparency, and improve accessibility for a broader range of issuers.
• The government should gradually reduce explicit or implicit guarantees and focus on market inclusivity.
• A comprehensive bond market development strategy is needed, involving all stakeholders and incorporating regulatory and supervisory improvements.
• The Capital Market Masterplan 2 (CMP 2) aims to address these issues and move the market toward a more mature and inclusive stage.