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 Phases of Retail Bonds and Sukuk Market

The retail bonds and sukuk market will be introduced in phases to provide retail investors time to gain the necessary understanding and familiarity with investing and trading in bonds and sukuk.

 

Under the first phase, the eligible issuers are the Malaysian Government and any company whose issuances are guaranteed by the Malaysian Government. Issuances by these issuers will naturally be subject to their own funding needs and requirements.

 

The second phase of the retail bonds and sukuk framework will be expanded to include the following issuers:

  • A public company listed on Bursa Malaysia (PLC);
  • A bank licensed under the Banking and Financial Institutions Act 1989 or Islamic Banking Act 1983;
  • Cagamas Berhad; and
  • An unlisted public company whose bonds and sukuk issuance is guaranteed by Danajamin Nasional Berhad, Credit Guarantee and Investment Facility or any of the eligible issuers above.

Investors can generally expect the following characteristics in bonds and sukuk:

Bonds and sukuk issued or guaranteed by the Malaysian Government

Bonds and sukuk issued by other Issuers

  • Low credit risk
  • There will be exposure to market risk (e.g. interest rate risk) and fluctuation of bonds and sukuk prices
  • Investors can expect guaranteed returns at pre-determined rate throughout the tenure of the bonds and sukuk.
  • Return of Capital
    • Return of principal invested is guaranteed if held to maturity.
    • Where bonds and sukuk are sold prior to maturity, the principal returned will be dependent on the market price at that time.
  • Credit risk will be dependent on the credit rating of the issuance (where rating is required) and the credit worthiness of the issuer
  • There will be exposure to market risk (e.g. interest rate risk) and fluctuation of bonds and sukuk prices
  • Investors can expect guaranteed returns at pre-determined rate throughout the tenure of the bonds and sukuk.
  • Return of Capital
    • Subject to the terms and conditions of the bond or sukuk,the principal invested will be returned at end of tenure provided the issuer does not default on the bond or sukuk concerned.). This is why it is important for investors to monitor the credit rating of the issuance (where rating is required) and the credit worthiness of the issuer)
    • Where bonds and sukuk are sold prior to maturity, the principal returned will be dependent on the market price at that time.