Special Adddress by
YBhg Dato’ Seri Ranjit Ajit Singh
Chairman, Securities Commission Malaysia
at the RAM League Awards 2016
Wednesday, 18 May 2016

YBhg Tan Sri Dato’ Seri Siti Norma Yaakob, Chairman of RAM Holdings Berhad
YBhg Datuk Seri Dr. K. Govindan, Group Chief Executive Officer of RAM Holdings Berhad
Distinguished guests, members of the media, ladies and gentlemen.
A very good evening.

1 It is a pleasure to be here at the RAM League Awards 2016 where the best institutions and organisations within the Malaysian bond and sukuk market are honoured for their contributions in further advancing this important segment of the capital market, as well as for the innovative deals that have come to market. I would like to thank RAM Holdings Berhad (RAM) for inviting me to this event and to deliver the special address. I would also like to congratulate Tan Sri Dato’ Seri Siti Norma, Datuk Seri Dr. K. Govindan and their team for the excellent efforts in organising this highly anticipated event which is in its 13th year running.
2 Since the establishment of RAM in 1990 as part of the institutional infrastructure to support the development of the domestic bond and sukuk market, it has played an important role in the provision of credit ratings for issuers. I am pleased to note that RAM continues to expand its reach through the Global and ASEAN rating scales launched in 2013, and has been collaborating in a series of roundtables in the region to raise the profile of ASEAN local-currency bond markets among regional and international investors.
3 In addition, just last month, it became the first credit rating agency within the region to introduce a rating framework for partial guaranteed bonds1, thereby broadening the spectrum of available risk-return trade-offs. I would also like to commend RAM for its capacity building efforts such as its collaboration with institutions of higher learning to produce market-ready graduates2, publication of ’Sukuk Reflections’ to support Islamic Finance thought leadership as well as regular investor briefings to increase investing knowledge.
Bond and sukuk market as an important source of financing
Ladies and gentlemen,
4 The need to develop well-functioning local currency bond markets is something that many advanced and emerging markets continue to emphasise. In this context, it is heartening to see our concerted efforts over the years have led to Malaysia establishing a significant bond and sukuk market which today is ranked as the third largest in Asia (relative to GDP3), and as the global leader in the sukuk market (53% of global issuances originated from Malaysia in 2015). The strength of our bond and sukuk market has provided several important imperatives.
5 First, standing at RM1.15 trillion4 today, having grown at a Compounded Annual Growth Rate of 9.5% from RM263 billion in the year 2000, the domestic bond and sukuk market has become a key source of financing within the Malaysian capital market. Out of total capital market fundraising through the primary market of RM90 billion5 for the fourth consecutive year, a significant portion (in excess of RM85 billion) emanated from the bond and sukuk market. This demand for bond and sukuk financing is expected to continue, with corporate issuance in 2016 estimated at approximately RM70 billion to RM80 billion.
6 Second, over the past decade, the Malaysian corporate bond and sukuk market has facilitated more than RM220 billion in fundraising for the development of various infrastructure assets including highways, airports, ports and power stations. This is a clear demonstration of the ability of the domestic bond and sukuk market to absorb large amounts of issuances to fund the nation’s physical infrastructure development, and it is one of the very few globally to have successfully done so.

As you are aware, national infrastructure investment needs in Asia-Pacific are projected at US$8 trillion between 2010 and 2020, which translates to an average of US$730 billion per year6. Given the substantial amounts of financing required, the SC has been actively collaborating with policymakers from around the region to pursue efforts aimed at facilitating capital raising for infrastructure development, through the ASEAN Capital Markets Forum (ACMF) as well as the Asian Bond Markets Initiative (ABMI). Additionally, the SC expects to play a significant role in IOSCO’s new workstream on infrastructure financing, which will garner the participation of members from advanced and emerging markets.
7 Finally, as a consequence of having a well-developed bond and sukuk market that can effectively channel funding for big projects over an extended period of time, greater diversity is achieved in the financial system and adds to resilience of our markets. As we have seen, the banking system has experienced considerable deleveraging following the financial crisis of 2007/2008. This has led to a gradual shift towards market-based financing where bond markets have increasingly provided a viable alternative to bank funding. Further, local currency bond markets can serve as a source of resilience given their ability to address risks stemming from currency and maturity mismatches.
8 In the Malaysian context, the bond and sukuk market has exhibited strong resilience7 during periods of challenging market conditions. Capital outflows due to the decline of foreign ownership in Malaysian bonds and sukuk last year were relatively well-absorbed by the large pools of domestic liquidity. Since the start of 2016, foreign holdings of ringgit bonds and sukuk have rebounded and increased by 8.4% to RM232.8 billion8. Concurrently, corporate bond and sukuk issuance in the first quarter of 2016 has increased by 65% to RM18.2 billion, as compared to the corresponding quarter in 2015.
Next phase of corporate bond and sukuk market development
Ladies and gentlemen,
9 It is absolutely critical that we continue to work together and apply our minds to take the Malaysian bond and sukuk market to the next level of development given its significance to the capital market and overall economy. Over the years, the SC has undertaken measured initiatives to elevate the financing capacity and investment potential of the domestic fixed income market, and has worked closely with the industry to develop the sukuk segment.
10 Given the attractiveness of bonds and sukuk for long-term savings, the retail framework was introduced in 2012 to provide direct retail access whilst widening the pool of investors for issuers. Through the listed retail sukuk offerings of DanaInfra Nasional Berhad, the country’s citizens have been able to participate in the nation’s development of the first Mass Rapid Transit line. More recently in 2014, the SC had launched the Sustainable and Responsible Investment (SRI) Sukuk framework to promote socially responsible financing and investment, in line with changing trends. Capitalising on this framework, Khazanah Nasional Berhad had issued the world’s first SRI Sukuk in June last year and RAM had assigned the credit rating for this inaugural issuance.
11 In driving further development of the Malaysian bond and sukuk market, the SC is working closely with industry experts to formulate targeted developmental initiatives. As a priority, the SC is reviewing measures to expand the offering of bonds and sukuk to the retail market including reviewing the conversion of existing wholesale bonds and sukuk for retail investors under a seasoning framework.
12 Broadening bond and sukuk market access will also entail a review to facilitate the entry of a wider base of industries and projects to raise financing, and provide investors with a wider range of credits to choose from. In addition, the SC will work towards improving information transparency in both the primary and secondary markets to facilitate informed investment decisions, which is expected to ultimately contribute to enhanced liquidity in the secondary bond and sukuk market.
Investor trust and confidence is a shared responsibility
Ladies and gentlemen,
13 The world has witnessed an erosion of investor confidence in advanced markets following the aftermath of the global financial crisis, and this has had a crippling effect on certain segments of the financial market9. Governance failures exemplified by the Libor and forex rigging scandals that rocked the financial system, has also had a significant effect in diminishing public trust in the marketplace.
14 Clearly, the success of any component of the capital market relies on investor trust and confidence. This in turn requires industry participants to not lose sight on the importance of having good conduct and high standards of governance. The SC therefore adopts a pre-emptive supervisory approach that encompasses registration and on-going monitoring of bond market intermediaries, including credit rating agencies, to safeguard market integrity. The SC’s oversight function also entails assurance that bond market intermediaries have vigorous processes in place to handle conflict of interest situations as well as proper internal channels for escalation of misconduct issues. Additionally, the SC continuously reviews its supervisory framework to ensure relevance and proportionality, and to effectively address market concerns as well as regulatory gaps.
15 Whilst the SC will continue to do its part to enhance the regulatory architecture required for a well-functioning bond and sukuk market, the industry has a shared responsibility to contribute towards building a sound ecosystem that fosters investor trust and confidence. This will go a long way towards preserving integrity of the capital market, including the domestic bond and sukuk market as it continues on its developmental path to remain as an effective platform that intermediates the fundraising needs of companies with the investment demands of investors.
Ladies and gentlemen,
16 Corporate bond markets will continue to provide a vital source of market-based financing that mobilises private capital into the real sectors of the economy for growth. Clear and transparent ratings premised on rigorous evaluation of the underlying fundamentals governing corporate bond issuers, coupled with good market practices of those charged with bringing bond issuances to market, will strengthen investor confidence and support capital formation, thereby creating the necessary conditions for the pursuit of further development of the domestic bond and sukuk market.
17 The RAM awards tonight are an accolade to industry players for their distinct roles and contributions to the Malaysian corporate bond and sukuk market. I would like to congratulate each and every winner of the various award categories. Before I conclude, let me once again thank RAM for its continued commitment and dedication in supporting regulatory efforts to foster a conducive ecosystem for efficient fundraising and investment through the local currency bond and sukuk market.
18 Thank you and enjoy the rest of the evening.

1 Under the partial guarantee rating approach, RAM will factor in the external support provided by the guarantor, hence allowing the elevation of the issue rating from the issuer’s stand-alone credit strength, with only a portion of the debt guaranteed.
2 RAM signed an MoU with Universiti Kebangsaan Malaysia (UKM) on 22 January 2015 to promote cooperation and communication between the two organisations to develop core competencies of graduates in the capital market.
3 After Japan South Korea.
4 As at end-April 2016.
5 In 2015, RM107 billion was raised through the Malaysian capital market – RM90 billion through the primary market (RM86 billion via bonds; RM4 billion via IPOs), and RM17 billion through the secondary equity market.
6 ADB & ADBI, Infrastructure for a Seamless Asia, 2009.
7 For example, the 5-year corporate AAA yields were relatively stable throughout 2015.
8 As at end-April 2016.
9 For example, there has been a dearth of securitisation transactions following the global financial crisis.