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PETALING JAYA: Malaysia’s capital market activity is on track to improve in 2021, as fundraising interest across some sectors indicates a return to pre-pandemic levels, according to Maybank Investment Bank CEO Fad’l Mohamed (pix).

He observed that there has been significant interest from first-time issuers (initial public offerings) across companies that have benefited from the Covid-19 pandemic, such as glove and healthcare-related firms; companies that have weathered the pandemic such as finance and fintech-related firms; as well as companies that were initially affected by the pandemic but have recovered at a stronger pace, such as logistics and selected real estate players.

Fad’l projected the trend of primary and secondary placements as well as block trades of last year will continue, as firms aim to fund their recovery momentum and inorganic growth opportunities and large shareholders look to recycle capital via secondary placements or block trades.

“In debt capital markets, we expect activity to match those prior to the onset of the pandemic, although corporate fundraising is currently focused more on refinancing and infrastructure, rather than new capacity building,” he said in a statement.

Meanwhile, the country’s bond and sukuk markets are expected to continue to be widely tapped for infrastructure projects this year.

The CEO stated that given the global movement towards clean energy and net zero emissions, there is increased demand and interest in green infrastructure.

In this area, he pointed out that Maybank is the market leader in capital market large-scale solar photovoltaic projects, having arranged 54% of all solar sukuk issuances from 2017 to 2019. The bank has also provided RM2.7 billion of financing to green energy projects.

Fad’l noted the recent awards for the fourth large-scale solar programme, LSS4 pave the way for more green financing and investment opportunities.

Furthermore, there is active fundraising by the financial industry sector, including capital raising by banking groups, amid the challenging credit environment.

“In addition, we expect a fair share of maturities this year to be refinanced as corporates are taking advantage of the relatively low interest rate environment to continue extending their liabilities, although the appeal has somewhat diminished over the past three months compared to 2020 where yields were at an all-time low.”

With regard to mergers and acquisitions (M&As), the CEO said heightened activity can be expected as confidence returns to the market and companies continue their quest for scale and in-country consolidation.

“We see greater activity in companies whose valuations have been impacted by challenges in 2020 but whose underlying business remains sound, especially in the retail sector. These are opportunities for shareholders to consolidate and reorganise its businesses,” Fad’l said.

M&As are also likely to be driven by ongoing trends of private equity investors looking to monetise their investments and multinational corporations reviewing their scale of operations.

Overall, the ongoing pandemic in the past 12 month has demonstrated the Malaysian capital markets’ resilience which will continue to remain broad and deep enough to support capital raising.

Fad’l pointed out that Mr DIY Group (M) Bhd’s RM1.5 billion IPO, which continued to see strong aftermarket performance with active participation from foreign institutional investors, and the strong bonds and sukuk volume of RM104 billion seen in 2020, provide a lot of comfort that there is still ample liquidity in the market.

In addition, the low interest rate environment continues to support domestic liquidity, as do privatisation deals which put cash back in the hands of minority investors.

While bond yields have trended up sharply in the past three months, he noted that they are still lower than the average yield in the last 10 years.

In addition, funds are still available and growing as demand for sustainable returns remains strong.

“Our observation corroborates with the just-released Securities Commission Annual Report, which highlighted that total funds invested in Malaysia by licensed fund management companies grew from RM620.1 billion as at end 2019 to RM649.5 billion at end 2020, despite the impact of the pandemic.

“Barring any unforeseen events such as another wave of infections, vaccine hiccups or political uncertainty, we expect capital market activity to return to healthy levels as all sectors of the economy forge ahead to rebuild and recover,” Fad’l said.


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