KUALA LUMPUR, May 19 — The credit spectrum in the domestic bond market needs to be expanded to include smaller bond issuers to ensure a sustainable growth, given the significant contribution of micro, small and medium enterprises to the Gross Domestic Product and employment, said Securities Commission Malaysia chairman Datuk Syed Zaid Albar.
He said the challenge is adapting the bond and sukuk markets to provide cost-effective means for small and lower-rated issuers to raise funds to meet their growth and expansion plans.
“This is particularly important because the greater or more inventive use of traditional assets alone will not be enough to foster better growth,” Syed Zaid said in his keynote address at the MARC Virtual Malaysian Bond and Sukuk Conference here today.
For example, he said, securitisation transactions embedded with the necessary safeguards have the potential to be a valuable financing tool, transforming illiquid assets into liquid and tradable assets.
“However, more transparency and ‘traceability’ of these assets will allow investors to better assess the risks involved,” he added.
Syed Zaid said the domestic bond market grew to RM1.6 trillion in 2020 despite the challenging environment, up from RM1.49 trillion as at end-2019.
This augurs well for its prospects, as well as Malaysia’s recovery and future growth, he said.
He pointed out that credit rating agencies play an important role as gatekeepers in enhancing transparency and safeguarding market confidence.
While credit ratings are now market driven rather than regulatory driven, he said demand for accurate, reliable and widely disseminated ratings has remained a constant feature of our debt markets.
“Effective internal control structures, good governance, transparency, and robust disclosures will therefore promote greater integrity in the rating process.
“This, in turn, would mitigate potential conflicts of interest, enhance ratings quality, and promote greater ratings accountability,” he added. — Bernama
