Top Story: MAS holds the key for covered bonds in Asia
Bankers in Asia are hopeful that the Monetary Authority of Singapore will approve guidelines for the issuance of covered bonds in the country as early as next week. The gossip on the sidelines of a covered bond conference in Singapore last week was that the regulator had almost completed its review of the draft guidelines that it had put out to the market for comment in March. According the MAS's draft guidelines, local banks will be allowed to issue as much as 2% of their assets as covered bonds. That is not much. Considering that Singapore lenders hold assets of SGD221.2bn (USD180.57bn), it would translate into just SGD4.4bn of covered bonds. Bankers in the city believe it could be more once foreign banks' local subsidiaries are included, but it would, at most, be double that amount.
HIGHLIGHTS:
"The Malaysian corporate sector is still governed through various regulations. An unregulated market is not a good market. There is also value to the regulations but what we want is regulations that are effective" - Securities Commission Malaysia Deputy Chief Executive, Datuk Dr Nik Ramlah Mahmood said in a BERNAMA interview on 27 November 2012 that the regulations are vital in focusing on growth so that it will add more value as well as quality to the companies.
S&P expands coverage of Asean rating scale | Business Times, Nov 23
Standard & Poor's Ratings Services has expanded coverage of its Asean regional rating scale to over 120 issuers, including Bursa Malaysia blue chip names like Petronas, Maybank and IOI. A total of 15 issuers are from Malaysia mostly from the finance counters. S&P said the expansion is to meet growing demand from investors participating in Southeast Asia's capital markets.
Asia's regional bond markets expand but risks loom | ADB, Nov 22
Emerging East Asia's local currency bond markets continue to expand and are performing well, but risks loom large on the horizon, warned the Asian Development Bank's (ADB) latest Asia Bond Monitor. "There are a number of downside risks to the local bond markets. The US could fall over the fiscal cliff and the new Chinese leadership has to deal with slowing growth in the world's second largest economy," said Iwan Azis, Head of ADB's Office of Regional Economic Integration. "A surge in volatile capital inflows and rising inflation in the region are also potential threats."
Slow start seen for private retirement funds | The Star, Nov 26
Despite competition heating up among private retirement funds, it is expected to take off at a slow pace as more education and promotion are needed to boost the take-up rate of these funds, according to fund managers.To date three fund houses CIMB-Principal Asset Management Bhd, Manulife Asset Management Services Bhd and Hwang Investment Management Bhd have launched a total of 17 private retirement funds under the private retirement scheme (PRS). Eight fund houses are granted licences in April by the Securities Commission as PRS providers.
More Asian companies turning to bond market | ChannelNewsAsia, Nov 20
More Asian companies are turning to the bond market for a cheaper source of long-term financing. This following rising liquidity in the region as major central banks in the United States, Europe and Japan undertake quantitative easing measures. Bonds issued in Asia, excluding Australia and Japan, have increased some 55 percent from US$461 billion in the first 10 months of 2011 to US$706 billion till end of October this year. Looking ahead, rising investor demand for safe assets will boost the Asian bond market further. Debt financing through corporate bonds has been mostly popular among companies in South Korea and Japan. Analysts said the trend has now caught on with Southeast Asian firms.
Zeti: Islamic finance must include lower income group for more balanced growth | The Sun Daily, Nov 27
Islamic finance must be inclusive and accessible to all particularly the lower income group and small businesses so as to achieve a more balanced global economic growth with reduced income disparities, Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz said. To this end, she said Islamic financial institutions must strive to enhance the access of their financial services to all segments of society by meeting the demand for more Islamic microfinance products.
Market Regulation
Bankers want OJK to rethink fee collections | Jakarta Post, Nov 24
Top executives at several local banks agree that the Financial Services Authority's (OJK) proposed fee-collection scheme is burdensome and incorrectly targets larger and more efficient banks. "We hope that the OJK's fees can still be evaluated so as not to be that expensive," Bank Mandiri president director Zulkifli Zaini said on Friday. The fees, which will be based on a bank's assets, would drive up Bank Mandiri's costs, he added. Zulkifli suggested that the financial watchdog consider a risk-based scheme, where banks with better governance and risk management would pay reduced fees, or a tax-deductible scheme, where fees paid to the OJK would reduce a bank's tax obligation.
MAS grants temporary relief for energy market brokers over Ice energy futures | Risk.net, Nov 23
The Monetary Authority of Singapore has confirmed that it has been awarding temporary exemptions from futures broking requirements for interdealer brokers caught by the IntercontinentalExchange's transition of energy swaps contracts to listed futures. After it was reported at the end of October that Ice had written to the regulatory authority asking that it grant brokers a temporary exemption from registering as futures brokers, MAS stated that it would discuss the situation with the interdealer brokers individually.
Banking experts say compliance must not stifle innovation | The Star, Nov 20
Policymakers will need to find an equilibrium between corporate governance and the expansion of Asia's banking and financial industry as growth shifts to the region in the wake of the drawn-out global financial crisis, said banking experts. Indonesian Banking Development Institute chief executive officer Dr Subarjo Joyosumarto said concentrating on growth alone would not be to the advantage of the industry as hidden dangers in the system would eventually boil over.
Sukuk become tool in Basel III capital-raising | The Star, Nov 23
A US$1 billion sukuk issue by Abu Dhabi Islamic Bank this month may start a trend that was probably not contemplated by the founders of modern Islamic finance: Islamic bonds may become a key tool for banks to meet tightening capital rules. The trend could add further momentum to a global boom in sukuk issuance. It could also ease pressure on banks which find it hard to raise capital from equity issues as global financial instability depresses stock markets.
Regional Affairs
Asean leaders begin RCEP negotiations | Bangkok Post, Nov 21
Leaders from the Association of Southeast Asian Nations (Asean) and their six regional free-trade partners officially kicked off negotiations for the Regional Comprehensive Economic Partnership (RCEP) yesterday. The meeting between the regional grouping and the leaders of Australia, China, India, South Korea, Japan and New Zealand underscored the 21st Asean Summit and Related Summits in Cambodia. The RCEP was first discussed at the 19th Asean Summit in November last year, when leaders of the 10 Asean member states adopted the framework for the RCEP, which sets out the general principles for broadening and deepening Asean's engagement with its free trade agreement partners.
Banking
BI ties bank services to capital level | Jakarta Post, Nov 24
Bank Indonesia (BI) has introduced several new regulations, including a much anticipated multiple-license requirement to classify bank services, to strengthen the nation's banking system. Under the multiple-license rule that will come into force next year, banks will be classified into four categories based on their capital level. Banks wanting to conduct certain businesses will need to either enlarge their core capital or merge with other banks to meet BI requirements. "There are many banks that currently operate below capacity, even below their economic scale, prompting inefficiency," BI Governor Darmin Nasution said at his speech in the annual Bankers' Dinner in Jakarta on Friday evening.
S-E Asia a hotspot for global investment bank growth | The Star, Nov 20
South-East Asia is expected to be a hotspot for growth for global investment banks while more consolidation is expected to reduce the number of major players to around 10 or less within the next three to five years, from the current 14. "This is more a stabilisation than a turnaround. Banks shouldn't rely on further growth in the near term, but rather focus on creating higher profits out of a flat revenue pool," said Roland Berger Strategy Consultants senior partner Markus Boehme.
Private Equity
Buyout transactions soar in Southeast Asia | Financial News, Nov 22
The total value of buyout transactions in Southeast Asia for the year to date stands at $3.6bn, up from $1.3bn in the corresponding period last year, according to data from the Centre for Asia Private Equity, as some of the world's biggest financial sponsors step up their presence in the region. This year's figure includes a $1.7bn takeover of snack-food franchises KFC (Malaysia) and QSR Brands by CVC Capital Partners, which has not yet closed. Kohlberg Kravis Roberts and Blackstone have opened offices in Singapore this year, with KKR co-founder Henry Kravis outlining plans last month to invest over $1bn in Southeast Asia over the next five years. Meanwhile, Carlyle Group recently closed its first transaction in the region, an investment in Indonesian telecom towers operator Solusi Tunas Pratama for between $100m and $150m, sources said.
Frontier Markets: The next big deal... | Business Today, Nov 27
The latest Grant Thornton 2012 Global Private Equity Report says that India and China face serious competition from their South East Asian neighbours in attracting investments. Indonesia, Peru, Colombia and Turkey top the list of new 'high growth' markets where private equity is likely to see the most opportunities. According to the report, the search for growth is making local private equity firms keep a watchful eye on where tomorrow's deal flow will originate, particularly as some of their home markets show signs of overheating.
Private equity interest shifts to Southeast Asia | WSJ, Nov 21
Some of the world's biggest private-equity firms have stepped up their presence in Southeast Asia this year, eager to benefit from the region's growth. But even as the value of transactions surges, the region remains a tough place to make a deal. One key reason: Valuations are rising quickly as competition heats up for assets. Companies, particularly those in Japan and Korea, are looking there for growth, more so as growth stalls in India and China, say bankers and deal makers. These buyers are often happy to pay more than private-equity investors.