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Saturday, January 17, 2009

Malaysia 2009 corporate bond issuance seen sharply lower

KUALA LUMPUR, Jan 15 (Reuters) - The global credit crisis could reduce new domestic corporate bond issues in Malaysia by as much as half this year to 25 billion ringgit ($7 billion).

John Chong, head of debt markets at Maybank's investment banking unit, said such a slowdown would be in line with market expectations.

"Last year the issue size of primary ringgit bonds in Malaysia for the whole calendar year 2008 was roughly around 46 or 47 billion ringgit and of that I would say easily more than half were obviously Islamic or sharia compliant," Chong told reporters.

"The market is basically looking at primary issuance roughly around 25 to 30 billion ringgit (this year)," he said after Aseambankers, a wholly-owned unit of Maybank, launched its new name, Maybank Investment Bank.

He said the Malaysian bond market will likely improve in the second half of the year on expectations of further interest rate cuts.

"We believe that in the second half of this year the fixed income, and I suppose the bond or credit market, would improve given the nature of ... how interest rates are moving. We are expecting further cuts in interest rates," Chong said.

"So with that we are looking at the second half of this year for things to improve slightly. Globally, maybe a bit later."

Malaysia's central bank last cut its key overnight policy rate to 3.25 percent in November after having held it steady at 3.50 percent for 2-½ years.

Economists also expect further monetary easing by Bank Negara Malaysia. They see it cutting interest rates by 50 basis points during the first quarter of 2009, taking its key rate to 2.75.

Chong said the bulk of bond issues in the country this year would be government, rather than corporate, and that they would mostly fund infrastructure projects. ($1=3.570 Malaysian Ringgit)

(Reporting by Loh Li Lian; Editing by Kim Coghill)

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