Author Topic: Retail bonds framework Initiative is part of Capital Market Masterplan 2  (Read 1833 times)

Offline Ļaughing Ģor

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Saturday September 8, 2012 The Star

PETALING JAYA: Direct access for retail investors to invest in bonds and sukuk has been made available by the launch of the retail bonds and sukuk framework by the Securities Commission (SC).

The introductory phase will see retail investors able to invest in bonds and sukuk issued or guaranteed by the Government. Issuances by these issuers will be subject to their own funding needs and requirements.

The SC said in a statement that in the following phase, the access would be expanded to include issuances by public-listed companies and banks licensed under the Banking and Financial Institutions Act 1989 or Islamic Banking Act 1983.

“The issuance of the relevant regulations and guidelines for this is targeted for January 2013,” it said.

It added that the phase-by-phase approach would enable retail investors to gain the necessary understanding and familiarity with investing and trading in bonds and sukuk.

The launch of the framework is part of the initiative under the SC's Capital Market Masterplan 2 to facilitate greater retail participation in the bond and sukuk market.

Prior to the release of the framework, retail investors' access to bonds and sukuk was largely through bond and sukuk unit trust funds and exchange-traded funds.

In the Capital Market Masterplan 2, the SC said that in conjunction with the Economic Transformation Plan (ETP), there was a need to broaden the capability and capacity of the bond market in order to increase the supply of financing of more projects.

Chairman Datuk Ranjit Ajit Singh said: “The retail bonds and sukuk framework is intended to meet retail investors' demand for access to a wider range of investment products. Issuers will also now have access to a larger pool of investors.”

The framework will enable retail bonds and sukuk to be issued and traded via Bursa Malaysia or in the over-the-counter market through appointed banks.

Among the different characteristics between bonds and sukuk issued or guaranteed by the Government and those issued by other issuers are that the former is low in credit risk while the latter's credit risk is dependent on the issuer's credit risk and credit worthiness.

Return on capital for government-guaranteed bonds and sukuk is guaranteed if the instruments are held to maturity.

Meanwhile, for bonds and sukuk issued by other issuers, the return on capital is subject to the terms and conditions from the issuer. The principal invested will be returned to the investor unless the issuer defaults on the bonds or sukuk.

The bonds and sukuk will be traded in both the primary and secondary market.

In the primary market, the exchange will be where bonds and sukuk are first offered to the retail investors via subscriptions.

However, in the over-the-counter (OTC) market, the issuer will have the onus of making an offer to investors to subscribe for the bonds and sukuk via banks.

In the secondary market, the exchange will facilitate the trade of bonds and sukuk while in the OTC market, investors will trade it through banks.

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