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Malaysia to open $307bn bond market to retail investors

Government plans to lower investment criteria to spur public interest

Participants at a Securities Commission conference check out the new website on bonds launched in Malaysia on Monday.

KUALA LUMPUR -- The Malaysian government said Monday it was reviewing existing rules on bond offerings to open up the market for retail investors by the first quarter of 2018. 

The move, which will involve reviewing primary and secondary market issuance processes and disclosure requirements, is aimed at spurring investor interest in fixed-income products that until now have been predominantly bought by institutional investors.

The revision could pave the way for more retail investment in fixed-income assets should regulators lower the eligibility criteria such as the bond size. More retail participation could also help create liquidity for the bonds in the secondary market.  

The Malaysian capital market is worth 1.3 trillion ringgit ($307 billion) of which government and Islamic bonds, or sukuk, account for 54% of total issuance. The balance is issued by corporations. Sukuk are Islamic bonds structured to be compliant with sharia, or Islamic law. Buyers do not receive interest, which is forbidden under sharia, but instead acquire an ownership interest in assets.

Securities Commission, the Malaysian government agency in charge of regulating the capital market, said it would ensure that issuers pay no additional cost by opening up the market to retail investors.

"Our hope is to provide more democratic access to investors into the 1.3 trillion ringgit marketplace," said Ranjit Ajit Singh, chairman of Securities Commission. The regulator said it was looking into requiring ratings for debt securities so that investors could better gauge risks involved. 

On Monday, the Securities Commission launched a centralized platform that combines all information on Malaysia-issued bond and sukuk, including pricing, credit ratings and news on a single website. The "Bond + Sukuk Information Exchange" website is expected to increase the transparency of the bond market and give retail investors easier access to information online for free. Malaysia accounts for 46% of the $75 billion in sukuk issued worldwide last year. 

Lee Kok Kwan, a board member of CIMB Group Holdings, said that the website would engage retail investors and help channel some of Malaysia's high levels of savings into fixed-income assets, most of which come with capital guarantees by the government.

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