RETAIL STRUCTURED PRODUCTS | Cesar Tordesillas, Malaysia

Malaysia poised to tap sukuk, RMB bond growth

Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz anrticipates growth in renminbi bonds and sukuk for her country.

She cites Malaysia's market size and supporting infrastructure to base her analysis.

“Malaysia not only has the largest debt securities market in Southeast Asia, but is also a leading international centre for sukuk issuance. Both markets are evolving as a multi-currency bond and sukuk market,” she said.

“The availability of renminbi bonds and sukuk as well as other financial products for portfolio investment, not only encourages renminbi receivables, but also helps build a pool of trade-driven renminbi liquidity in the Malaysian market,” Zeti (picture) said.

She said the renminbi, apart from being used as trade settlement, is also increasingly being utilised for investment and funding.

“Trade settled in renminbi currently represents only slightly above one per cent of Malaysia’s bilateral trade with China. There is therefore, potential for this to increase,” she added.

Zeti said in addition, funding and foreign direct investment activities in renminbi have also increased, with greater awareness on the use of the currency for the settlement of trade and direct investment transactions, as well as for the potential to raise financing by businesses.

“The use of the renminbi for trade settlement provides a natural hedge for businesses with renminbi obligations. It also generates cost savings and minimises exchange rate risks.

“In particular, it reduces the exposure, to exchange rate fluctuations of a third currency,” Zeti added.

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