The Borneo Post

Three issuer defaults in corporate bond and sukuk

Malaysia’s corporate bond and sukuk market had only three issuer defaults in 2022, amounting to RM1.44 billion or 0.18 per cent of total outstanding corporate bonds and sukuk, thanks to the enhanced monitoring tools adopted by the Securities Commission (SC).

The SC said that with the enhanced tools to supervise the market, it closely monitored issuers from identified business sectors that were impacted by the Covid-19 pandemic.

The sectors included property, infrastructure, utilities as well as oil and gas, it said in its Annual Report 2022 released yesterday.

“Several corporate bond issuers had requested investors’ indulgence for exemptions in either payment of coupon, profit or principal, or extension of time to meet agreed-upon financial ratios as well as other forms of refinancing.

“These corporate bond issuers, however, make up a very small portion of the corporate bond and sukuk market,” the market regulator said.

The SC said apart from the low default rate, rating downgrades also declined to seven last year from 10 in 2021.

“Of the seven rating downgrades, four were from the infrastructure and utilities sector, one from the property sector, one from the trading and services sector, and one from the mining and petroleum sector,” it said.

As for the rating outlook, the regulator said downward revisions in the corporate bond rating outlook fell to six in 2022 compared to 10 in 2021.

The SC noted that domestic bond yields trended upwards last year, in tandem with rising global bond yields, aggressive tightening of monetary policies by central banks, the Ukraine-Russia war and accelerating inflation coupled with recessionary fears.

“From the SC’s observations, these events did not have any major impact on domestic corporate bond issuers’ ability to service their bond financial obligations promptly,” it added.

On surveillance of publiclisted companies (PLCs), the SC said such activities throughout 2022 involved the review and assessment of 442 matters triggered via announcements and news articles, as well as complaints it received in relation to 277 PLCs for possible violations of securities laws.

“The SC, in the course of its reviews, engaged with the directors, officers, statutory auditors and other professionals involved in the affairs of 23 PLCs,” it said.

It said overall, while there did not appear to be an alarming sign of deteriorating credit health in PLCs, it was observed that escalating external challenges affecting the capital market, such as the strengthening US dollar, prolonged geopolitical tensions, disrupted global supply chain as well as the rising cost of inputs may put pressure on the liquidity risk for companies with large debts.

“This situation will continue to be monitored to manage and mitigate any potential risk or impact on the capital market,” it said.

Meanwhile, the SC said following the introduction of the temporary relief measures, including the higher general mandate of up to 20 per cent for private placement, its surveillance reviews highlighted some concerns, including the utilisation of funds raised via share issuances and related disclosures made by PLCs.

“Where irregularities or possible securities law breaches were detected, such matters were escalated for further investigation and/or enforcement action.

“Bursa Malaysia was also engaged in matters requiring closer scrutiny on their part as the frontline regulator,” it said.

The SC said it is working on its inaugural Capital Market Stability Review which is scheduled to be published in the first quarter of this year.

“This report will outline overall risk assessments of the Malaysian capital market and discuss relevant systemic risk drivers,” it explained. — Bernama

Business

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2023-03-28T07:00:00.0000000Z

2023-03-28T07:00:00.0000000Z

https://epaper.theborneopost.com/article/282475713082010

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