Malaysia kicks off its first-ever sustainability sukuk deal

 

Malaysia’s last issue in the overseas debt market was in 2016.

KUALA LUMPUR: Malaysia has started marketing its first-ever sustainability sukuk, adding to a growing number of countries turning to debt financing for environmental projects.

It is marketing dollar-denominated Islamic finance securities in 10-year and 30-year parts, and the shorter tenure is a sustainability offering, a person familiar with the matter said.

The deal may be finalised as soon as today.

Sustainable debt issuance rose 29% last year to a record US$732 billion, according to figures from BloombergNEF. Indonesia sold green debt that complies with religious principles in 2018, making it the first country in the world to issue such securities, according to a United Nations Development Programme report.

“Demand for ESG or sustainability-linked bonds continues to gain traction while there is still a limited supply” of such issuances from Southeast Asia, said Winson Phoon, head of fixed-income research at Maybank Kim Eng Securities in Singapore.

“Adding the sustainability label helps widen further the investor base.”

Malaysia is also an infrequent issuer in overseas debt markets, last selling dollar debt in 2016. The sovereign’s existing US currency notes have longer duration, which made them vulnerable to a sell-off during the last quarter as yields spiked, but they have since recouped some losses as interest rates retreated.

Like governments around the globe, Malaysia has been tackling the impact of the pandemic, and Prime Minister Muhyiddin Yassin unveiled a RM20 billion stimulus package last month that included discounts on power bills, tax breaks and cash aid to the poor.

The nation’s gross domestic product may expand 6% to 7.5% in 2021, Bank Negara Malaysia said last month. That is potentially slower than its earlier projection of a 6.5%-7.5% growth, but still ahead of many of its neighbours. - FMT