KUALA LUMPUR: Malaysia’s bond market is a key source of fund raising for corporates, with corporate bonds constituting RM714bil of the outstanding amount as at Sept 30, 2020.

Securities Commission Malaysia (SC) executive chairman Datuk Syed Zaid Albar said corporate bond issuers have raised about RM63bil during the same period.

"As highlighted by the World Bank’s report, the bond market has successfully funded the nation’s infrastructure development, which includes our highways, airports and other key utilities,” he said in his opening remarks at the launch of the World Bank report titled ‘Malaysia’s Domestic Bond Market: A Success Story’ here, today.

The event was held virtually in conjunction with the four-day online Sustainable and Inclusive Finance Forum co-organised by Bank Negara Malaysia and World Bank Group, which ended on Friday.

From an investment perspective, Syed Zaid said ringgit bonds are a proven asset class.

"Given the country’s strong macroeconomic fundamentals and with more than 90 per cent of rated issues ‘triple-A’ and ‘double-A’, it is attractive for our deep and well-diversified institutional investor base,” he said.

Presently, besides domestic corporations, he said the SC had also seen foreign issuers from Asia, Europe and the Middle East, as well as multilateral institutions, tap the local bond market for their financing needs.

However, Syed Zaid noted that Malaysia saw minimal foreign outflows in bond market early this year, with foreign holdings in bonds declining to RM186 billion in April 2020 from RM200 billion in February this year.

"The shifts in global liquidity away from emerging markets early this year highlight the conundrum faced by developing economies.

"Even as local currency bond markets reduce currency mismatches, they are still vulnerable to foreign outflows and the tightening of financial conditions,” he said.

Therefore, he said three suggested attributes would be able to ensure the resilience and stability of emerging bond markets, including Malaysia’s.

"Firstly, sound macroeconomic policies that favour the longer term, secondly, a deep domestic investor base, and thirdly, an efficient support system in terms of legal frameworks and risk structures that promote innovation.”

Moving forward, Syed Zaid said the SC believes demand for market-based instruments that provide both financial as well as social returns will grow.

"As the world deals with the COVID-19 pandemic-induced challenges, there is growing recognition that businesses have a larger responsibility to mitigate environmental, social and governance risk,” he said. - Bernama