Malaysia is by no means the most prolific or highest-profile Asian sovereign borrower. That honour goes to the Republic of the Philippines. But the Philippines gets deals away in spite of itself. There’s hardly a transaction from the country that isn’t surrounded by controversy and negative publicity. Such accusations cannot be aimed at Malaysia. As one head of debt says: “It’s very different to the Philippines. While the Philippines has very much an emerging-market mindset and is still seemingly unsure about what it has to do, Malaysia is first class with a top-notch team led by a very efficient central bank governor, Dr Zeti.”
An emerging-market mindset, according to bankers, means that a sovereign is unrealistic on funding levels, too aggressive on pricing and screws banks on fees. Several bankers name Thailand, which came to the market last month with a $300 million FRN, as another prime example of a sovereign with an emerging-market mentality. One banker says of Thailand: “It’s unprofessional quite frankly.”
The most common comment used about Malaysia is that it doesn’t fund irrationally. Although if it wanted it could tap the market with easy regularity because of the confidence in its name, it refuses to do so. It only borrows when necessary.
In the past 12 months in the international markets it reopened its 2011 bonds in August and successfully took money through a US$368 million syndicated loan in March. The loan is a good example of Malaysia’s mature attitude to borrowing. Despite the sovereign’s being able to afford an upcoming refinancing itself, it realized that with the dearth of transactions in the market caused by the war in Iraq and fear of Sars it would be able to get highly favourable terms. A banker close to the deal says: “In the end we actually wanted to give them more money but it said no. It only wanted enough money to cover the refinancing.”
Malaysia also clearly stands out from other sovereigns because it is prepared to look to alternative and new sources of financing. In June 2002 it completed the $500 million newly structured global Sukuk bond deal. This deal enabled the sovereign to tap into the under-utilized $200 billion funds of the Middle Eastern Islamic investor base while at the same time still attracting more regular followers. It proved that it was unafraid of using innovative and untested products to raise the necessary capital while in addition showing a consistency in its strategy by casting its net wide.
Malaysia’s investor base continues to be one of the most diverse in Asia, with transactions completed in dollars, euros, yen, and local currency. However as one banker points out, being able to attract all sections of the investor community is a necessity. After all, it is said, no-one is too sure which set of investors the country’s leader, prime minister Mahathir Mohamad, might upset next. “This quarter he is anti-American and pro-European,” the banker says. “Next quarter, it’s anyone’s guess who he will annoy, so Malaysia really does have to focus on the diversification of its investor base.”
It’s something it does very well.
