Source: MoF

KUALA LUMPUR, Oct 11 -- The overwhelming response to the government's Samurai bond issuance reflects strong confidence among Japanese investors on Malaysia's economic fundamentals, said the Ministry of Finance (MOF).

In its Fiscal Outlook and Federal Government Revenue Estimates 2020 report released today, the MOF said the bond issuance also further enhanced diversification of funding base while strengthening Malaysia's position as among the leading investment hubs within the region.

On March 15, 2019, Malaysian government successfully issued 200 billion yen of 10-year Samurai bond at an annual coupon rate of 0.53 per cent, marking the government's return to the Japanese bond market after a 30-year absence.

The issuance was guaranteed by Japan Bank for International Cooperation (JBIC) under its Guarantee and Acquisition toward Tokyo market Enhancement (GATE) programme, sold only to Japanese qualified institutional investors.

MOF said the issuance marked the largest 10-year single tranche Samurai bonds either in public format or in JBIC-guaranteed format.

"The transaction re-establishes Malaysia's strong standing with the Japanese investor base, while securing long-term financing from the Japanese market," it said.

The report also said Samurai bond saw a wide range of quality investors participated in the transaction with strong demand from specialised banks, city banks, life insurance and regional banks.

"Main investors such as specialised banks and city banks placed large size orders, which supported the book building.

"At the same time, several regional investors also placed orders larger than they usually would, indicating enthusiastic reception by Japanese investors on papers," it said.

In terms of the number of investors, MOF said there were 46 investment firms participated, of which 31 were regional investors.

"The government received a total interest amounting to 324.7 billion yen (RM11.9 billion), translating into an oversubscription of 1.6 times than the issuance amount," it said.

The Samurai Bond is a government-to-government (G2G) arrangement and also the effort by both Prime Minister Tun Dr Mahathir Mohamad and his Japanese counterpart Shinzo Abe, which aims to foster closer economic and cultural ties between Malaysia and Japan.

Proceeds from the issuance are used for general purposes, to finance development projects and programmes such as building schools, hospitals, roads and provide access to utilities, said the report.

-- BERNAMA