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Bloomberg reported that PLUS Expressways Bhd, Malaysia’s largest toll-road operator, plans to sell RM1 billion (US$277 million) of Islamic bonds to help repay maturing debt and finance expansion projects.

Bank Islam Malaysia Bhd and CIMB Islamic Bank Bhd will help sell the Syariah-compliant bonds, known as sukuk, PLUS managing director Noorizah Abd Hamid said in a phone interview from Kuala Lumpur today.

The sukuk will have maturities of at least five years, Noorizah said. The company aims to raise RM350 million “in the coming months” to refinance a loan maturing in June and to borrow another RM200 million in the second half of the year to fund a road project in Indonesia, she said.

PLUS favours Islamic over conventional debt so it can remain in the Dow Jones Islamic Index of Syariah-compliant companies, Noorizah said. Sukuk are typically asset-based securities and pay a profit rate to investors instead of interest, which is banned by Syariah law.

PLUS is in talks to acquire more local and overseas road projects which would require more debt, Noorizah said, declining to be more specific.

Protradeshares feels that as long as PLUS don’t raise the toll further, whatever methods they use to raise fund is no issue.

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Bloomberg reported that Malaysia’s  ringgit fell to an eight-week low after Fitch Ratings cut the outlook on the nation’s local currency debt rating to “negative” from “stable,” citing the government’s widening budget deficit.

The currency extended its worst start to a year since the Asian financial crisis after US reports showed manufacturing shrank and consumer spending dropped for an unprecedented sixth month in a row. A global recession is curbing demand for goods produced in Asia and prompting investors to favor safer bets than emerging markets.

“As long as the US economy and stock market continue to suffer, it will affect currencies like the Malaysian ringgit and Singapore dollar,” said Hideki Hayashi, chief economist at Shinko Securities Co in Tokyo. “Investors will prefer to keep their assets liquid and this will sustain the demand for US dollars, at least in the next six months.”

The ringgit traded at 3.6240 per dollar as of 9:49 am in Kuala Lumpur from 3.6077 on January 30. The currency earlier reached 3.6365, the weakest since December 9. It fell 4.3 per cent last month, the worst January since 1998. Malaysia’s financial markets were shut yesterday for a holiday.
South Korea yesterday reported a record 33 per cent drop in January exports, while a survey by CLSA Asia-Pacific Markets showed China’s manufacturing contracted for a sixth month.

Malaysia last month reported the biggest drop in overseas sales in almost seven years for November and said industrial output shrank the most since 2004.

Asian economies such as South Korea and Taiwan, and to a lesser extent Malaysia, will feel the impact of the drop in US demand because of the concentration of electronics goods such as semiconductors and memory chips in their overseas shipments, Hayashi said.

Deputy Prime Minister Datuk Seri Najib Tun Razak on January 29 said Malaysia will unveil a second fiscal stimulus program to help revive growth. The budget deficit will be revised up from its forecast of 4.8 per cent of gross domestic product, he said.

ProTradeShares is looking at the “Positive” side of the Ringgit falling which could lead to; higher export thus leading to a better economy for the country and more foreign investor to Bursa, hopefully provide more liquidity to the stock market.

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The interest charged by financial institutions in Malaysia is one of the highest in the region at 1.5% per month which works out to an effective annualised rate of almost 20% per annum. Although many consumer associations and NGOs has requested Bank Negara to impose a lower rate, Pro Trade Shares would prefer if Bank Negara imposes higher restriction  such as having a maximum number of credit cards any individual can hold at any one time. With lending rates reduced and lower cost of funds, consumers are now rallying for credit card interest rates to be slashed to help them get out of debt.

Credit card interest is now pegged at 18% a year (1.5% a month) making it an uphill task for those with large outstanding balances to be debt-free.If one can only afford to pay the minimum 5% repayment each month, it could take forever to repay as balances snowball under the high interest rate.There are 10.3 million credit cardholders in the country with total debt standing at RM22.8bil as of Dec 2008.Recently, Bank Negara announced a 75 basis point cut in the indicative overnight policy rate or OPR to 2.5%.

Following this, banks reduced their base lending rates (BLR), which eased the burden on those servicing housing and mortgage loans.

The country’s largest bank, Maybank, has reduced its BLR to 5.95%, from 6.5%, with RHB Bank, Hong Leong Bank, CIMB and Bumiputera Commerce Holding Bhd also among other banks fixing a similar BLR.

Many feel it is about time that credit card interest rate be adjusted, given the challenging economic scenario.

Consumers Association of Penang (CAP) president S.M. Mohamed Idris called for the 20-day interest free period for credit cardholders making purchases to be reinstated, regardless of whether they paid their outstanding balances in full.

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