I'm surprised on the magnitude but truly welcome it, as I have been promoting before here
Cursory note....tak habis bace lagi ni....one initiative prop up
Financial Guarantee Institution-quote from budget speech
"Under the current market conditions, even companies with investment grade ratings are unable to access the capital market, particularly the bond market. To assist and facilitate these companies access the bond market, the Government will establish a Financial Guarantee Institution to provide credit enhancement to companies that intend to raise funds from the bond market. This measure will also further develop the domestic bond market. Bank Negara Malaysia will assist in the setting up of this institution. This government-owned company will have an initial paid-up capital of RM1 billion, which will subsequently be raised to RM2 billion. It is expected that bonds totalling RM15 billion will be raised under this facility."
- Why can't these function be in the hands of say CGC by amending its scope of services to cover this new requirement...instead of creating a new GLC? Back in 2001 Amanah Capital was trying to set up a similar outfit called the Malaysian National Financial Guarantee Insurer tapi takde hasil.
- On another note, Asian Development Bank is actively pursuing a similar initiative on a regional basis with focus on USD funding requirements. How will this work hand in hand with the new agency?
- Why can't this be done via development of Collateralized Loan Obligation Market with some form of credit wrap by existing institutions such as banks? Our banks have always been active in Bond Guarantee Market....
One thing about guarantee, it distorts the perception of risk and affects pricing, we saw what happened in America when the risk became too concentrated
I hate duplication of resources, especially if it involves RM 2 Billion of capital.
At the same time you plan to rope in EFP as an investor to the Guarantee Outfit when they could potentially be buyers of the bonds....wouldn't the risk cover cancel out (partially)for them?