Plan for more Islamic bonds

KUALA LUMPUR: Khazanah Nasional Bhd may sell Islamic securities such as bonds that can be converted into shares to reduce its ownership of government-linked companies (GLCs).  

“We are committed to reducing our stakes gradually in an orderly fashion,” managing director Datuk Azman Mokhtar told reporters yesterday. “This kind of structured product could be a very useful mechanism in doing it.”  

Khazanah is using rising interest in Islamic finance to ease Government control over the country’s biggest companies. Malaysia is the world’s largest issuer of syariah-compliant debt.  

Last September, Khazanah raised US$750mil in South-East Asia’s biggest sale of Islamic convertible bonds, as it sought to cut its stake in Telekom Malaysia Bhd (TM). The bonds are convertible into TM shares held by Khazanah.  

“There is a lot of demand for Islamic products out there,” Yuslam Fauzi, chief executive officer of Bank Syariah Mandiri, the Islamic banking unit of Indonesia’s biggest lender, PT Bank Mandiri, said in interview. 

“Companies won’t have any problem selling Islamic products. Bank Syariah Mandiri itself, right now, is looking to buy more” of the products, said Fauzi. 

From right: Datuk Azman Mokhtar chairing a discussion at the Global Islamic Finance Forum. With him are HSBC Group advisor Iqbal Khan and Bumiputra-Commerce Holdings group chief executive Datuk Nazir Razak.

Khazanah holds about RM60bil of shares in 26 publicly traded companies, including TM, and Tenaga Nasional Bhd. 

“The template is there, so we can go to the market in a very short time – a few weeks once the decision has been made,” Azman said. “Our financial position is secure and stable. It really depends on the need for financing.”  

Selling Islamic convertible bonds will “minimise disruption” to the stock market, said Kaladher Govindan, head of research at TA Securities Bhd. 

“An investor who holds the bond would enjoy the coupon and if he wanted to ride on the stock market, he can convert them into shares. This means the process will take time, compared with selling a stake to another party who could sell it en bloc.”  

“Malaysia has got the head start,” Rafe Haneef, head of Islamic Banking in Asia for Citigroup Inc, told reporters before the announcement.  

“Malaysia definitely has a more robust infrastructure from the capital market, the money market perspective, compared with the rest.” – Bloomberg