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RHB takes CIMB sukuk deal crown months after megabank bid stalls

RHB Capital overtook CIMB Group Holdings as Malaysia's top sukuk arranger, resuming their rivalry three months after failing to form an Islamic megabank.

[KUALA LUMPUR] RHB Capital overtook CIMB Group Holdings as Malaysia's top sukuk arranger, resuming their rivalry three months after failing to form an Islamic megabank.

RHB jumped from 2014's fourth position after managing 20 offerings in 2015 valued at 3.9 billion ringgit (US$1.1 billion), compared with 23 transactions for 3.8 billion ringgit by CIMB, which led the rankings for the past six years, data compiled by Bloomberg show. AmInvestment Bank held on to the third spot, while Malayan Banking slipped to fourth from second.

Competition is intensifying after Malaysian sukuk sales fell 11 per cent to 22.7 billion ringgit this year amid a slump in energy prices that has forced the net oil-exporting nation to lower its economic growth target and driven the ringgit to a six-year low. RHB and CIMB were in talks with Malaysia Building Society to create a lender with the financial clout to challenge the likes of HSBC Holdings Plc and Standard Chartered Plc. The deal was scrapped in January, with the parties citing unfavourable economic conditions.

"The sukuk market has been impacted by the negative sentiment which plagued Malaysian financial markets in the first quarter," Angus Salim Amran, Kuala Lumpur-based head of financial markets at RHB Investment Bank Bhd., a unit of RHB Capital, said by e-mail Monday. "We see markets stabilising going into the second quarter. Sukuk issuance for 2015 is expected to match that of 2014."

AmInvestment arranged 13 deals for 2.2 billion ringgit this year, while Maybank, as Malayan Banking is known, managed 16 sales for 2.1 billion ringgit. The figures represent market shares of 15 per cent and 14 per cent, respectively, compared with 26.4 per cent for RHB and 25.7 per cent for CIMB. The proportion underwritten by HSBC in Malaysia was 1.7 per cent, and less than 1 per cent for Standard Chartered.

Malaysia's Islamic bond sales added up to 66.1 billion ringgit in 2014, with CIMB arranging 30 per cent, Maybank 23 per cent, AmInvestment 14 per cent and RHB 12 per cent, according to new league tables compiled by Bloomberg. Issuance was 65.1 billion ringgit in 2013.

The nation's biggest Islamic bond sales this year have come from companies involved in the government's US$444 billion development program to build railways, roads and power plants. Light-railway operator Prasarana Malaysia sold 2 billion ringgit of Islamic bonds and DanaInfra Nasional, a state- owned company set up to finance a subway in Kuala Lumpur, issued 3.5 billion ringgit. Both offerings took place last month.

The projects could help Malaysia's sukuk issues reach 70 billion ringgit in 2015, according to CIMB Islamic Bank, a unit of CIMB Group.

"We do not see any significant or major slowdown in some of the infrastructure developments that have been planned," Badlisyah Abdul Ghani, Kuala Lumpur-based chief executive officer at CIMB Islamic, said by phone Monday. "We expect the sukuk market to be quite vibrant and active for the full year."

Worldwide offerings of debt that comply with Islam's ban on interest fell 15.6 per cent to US$14.9 billion in 2015 from the comparable period a year earlier, according to data compiled by Bloomberg.

Malaysian Prime Minister Najib Razak lowered the 2015 economic growth target in January to 4.5-5.5 per cent from an earlier projection of as much as 6 percent, citing the damping effect of an oil price slide. Brent crude has declined 43 per cent since June, cutting export revenue and spurring a warning from Fitch Ratings about a possible credit downgrade. Southeast Asia's third-biggest economy derives about 30 per cent of its government revenue from energy-related sources.

The ringgit has dropped 8.1 per cent since October and reached a six-year low in March, due mainly to oil prices. The currency rose 0.4 per cent to 3.5650 a dollar in Kuala Lumpur Monday.

Infrastructure companies and financial institutions will lead Malaysian Islamic bond sales in 2015, with offerings seen totaling 60 billion ringgit, according to RAM Rating Services Bhd.

"Though we have challenges, the economy is still fairly resilient," Promod Dass, Deputy Chief Executive Officer of RAM Rating in Kuala Lumpur, said by phone Monday. "We do expect the sukuk market to still stay resilient."