[sangkancil] Malaysian bond investors make a killing on strong debut (fwd)
---------- Forwarded message ----------
Date: Fri, 28 May 1999 06:52:26 GMT
From: Yap Yok Foo <yfyap@pop.jaring.my>
Newsgroups: jaring.general, soc.culture.singapore, soc.culture.malaysia
Subject: Malaysian bond investors make a killing on strong debut
From BT, Singapore
28th May 1999
Malaysian bond investors make a killing on strong debut
Mahathir promises more when interest rates are steadier
By Catherine Ong in Singapore and Eddie Toh in Kuala Lumpur
INVESTORS lucky enough to get their hands on Malaysia's new US$1
billion (S$1.7 billion) bond issue made an instant killing during its
debut trading yesterday.
Even as investors hailed the latest 10-year sovereign as a successful
"coming out party" for a country treated as a pariah since it
introduced capital controls in September, Prime Minister Mahathir
Mohamad promised another issue of equal size when interest rates are
steadier.
The yield premium of the new global bonds, launched on Wednesday in
New York, quickly fell on its first day of trading. It dropped nearly
40 basis points to some 292 basis points above the benchmark US
Treasuries, dealers said.
The bond carried a coupon of 8.75 per cent and was priced to yield
8.862 per cent, or 330 basis points above the comparable yield on US
Treasury bonds of 5.562 per cent.
In Kuala Lumpur, Dr Mahathir said the issue attracted a lot of
investor interest and reflected increased confidence in the country.
"People have accepted that our economy has turned around. They are
confident about the future of Malaysia and this is why they are
willing to put money in the country," he said.
Finance Minister Daim Zainuddin, in New York for the roadshow, noted
that the issue was oversubscribed three times. "Given the prevailing
market conditions and the decline in the emerging market index, the
spread is considered favourable."
A government official noted that Malaysia was in no hurry to raise
more money. "We don't really need the money. We reserve the right to
issue the rest during better times," he said.
The issue's success, however, came at a higher price than Malaysian
officials and lead manager, Salomon Smith Barney, had bargained for.
Caught in a new bout of investors' jitters over a possible rise in US
interest rates, and a feared devaluation of Argentina's currency,
Malaysia was forced to lower the issue price of the bond to 99.268.
That raised the yield some 100 basis points above the level expected
at the start of its international roadshow two weeks ago, and higher
even than that of Petronas bonds. On a US$1 billion issue, that works
out to another US$10 million in interest payments.
Malaysia also scaled back the size -- it filed to raise US$3 billion
with US regulators -- and cancelled a five-year tranche.
The higher yield delighted the market. "At 330 basis points, you can
close your eyes and buy," said Lye Thiam Wooi of OUB Asset Management.
Vivek Goyal, an analyst with Duff & Phelps Credit Rating Co, added:
"The bonds were priced to sell. But I wouldn't call it a giveaway.
"You've got to look at the larger context. When investors buy bonds,
they look at how other bond markets are performing and the Latin
America worries have had some impact."
Rating agencies pitch Malaysia's debt as "investment grade", on par
with South Korea but one notch higher than Thailand. But the market,
in fact, put a higher value on the Korean sovereign and traded the
Malaysian at a price closer to "junk" bonds. The bonds were placed out
to 134 investors -- 62 from the US, 49 from Asia and 23 from Europe.
Rafat Rizvi, head of fixed-income sales at Paine Webber, believed the
issue would still have gone well if it were three times larger.
"Spreads have been compressing across the board in Malaysia, and
generally, the investors' perception of Malaysia has been overdone on
the downside," he said.
He also pointed to a general rise in investors' confidence in Asia
http://business-times.asia1.com.sg
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