JPMorgan: Malaysia market activities shall surge first half 2010

Category:JPMorgan Chase


The head of investment banking in Malaysia at JPMorgan thinks that there is going to be a spike in activities in the first half of 2010

Malaysian corporate share and debt sales will likely increase next year and investment banks plan to boost hiring in anticipation of more deals, bankers from JPMorgan Chase & Co and Credit Suisse Group AG said.

"There is going to be a spike in activities in the first half of next year,” Didi Yahya, the head of investment banking in Malaysia at JPMorgan, said in a telephone interview on December 16. “I think 2010 is going to be a good year.”

Proceeds from share sales have soared more than sixfold this year in the Southeast Asian nation, including Maxis Bhd’s US$3.3 billion initial public offering last month, as the government of Prime Minister Datuk Seri Najib Razak works to liberalize the economy. Goldman Sachs Group Inc this month set up fund management and corporate finance advisory operations in Malaysia.

“Previously there were some concerns as to whether Malaysia is still on the map,” Edwin Low, Credit Suisse Group AG’s head of investment banking for Singapore and Malaysia, said in an interview on December 16. “With the Maxis deal, it shows clearly that Malaysia is.”

Companies raised RM17.8 billion (US$5.2 billion) from underwritten share sales and rights offerings in Malaysia so far this year, up from RM2.8 billion for the whole of 2008, according to Bloomberg data.
Selling debt raised RM51.1 billion this year, from RM48.6 billion in 2008. Petroliam Nasional Bhd, Malaysia’s state-owned oil and gas company, sold US$4.5 billion in bonds in August in the biggest dollar issue by an Asian company outside Japan this year.

Maxis IPO

Credit Suisse was the joint global coordinator and book-runner in the Maxis IPO, together with Goldman Sachs, ranking the Swiss company second for equity and rights offerings in Malaysia this year, from 17th in 2007, Bloomberg data shows. The Maxis share sale was Southeast Asia’s biggest IPO and the largest in Malaysia since 1995.

Some IPOs that were put on hold this year will take place in 2010 and companies are also considering selling bonds to attract overseas investors, according to JPMorgan’s Yahya. Investors who took companies private may also be looking to exit and government-linked companies are considering selling businesses and stakes, he said.

JPMorgan plans to expand his team of about 100 people in the country, Yahya said.
“It’s a market where there’s a lot of hiring going on because people see renewed activity,” said Low of Credit Suisse. “We will certainly see a lot more” equity and debt sales and mergers and acquisitions involving Malaysian companies next year.

Easing Restrictions

Malaysia is easing restrictions on its banking industry as the nation seeks to curb its dependence on exports and win more foreign direct investment. Last month, Industrial & Commercial Bank of China Ltd, the world’s biggest lender by value, was the first overseas company to get a banking license in nine years.
To boost the number of shares available in the open market to attract investors, Najib earlier this year called on state- linked investment agencies to sell part of the stakes they own. Khazanah Nasional Bhd, Malaysia’s state investment arm, has cut holdings in companies including power utility Tenaga Nasional Bhd, PLUS Expressways Bhd and Malaysia Airports Holdings Bhd.

“The Malaysian market is currently dominated by domestic investors” in part because of the “disproportionate size of government-linked funds,” Credit Suisse’s head of Malaysian research Stephen Hagger wrote in a note last month.

Malaysia raised foreign ownership limits at non-commercial banks and will let in more overseas lenders for the first time in more than a decade, Najib said in April. It will also relax foreign ownership rules on stock brokers, retail unit-trust management companies and wholesale fund-management units, he said two months later.

‘Return of Confidence’

Najib, who took office in April, has unveiled RM67 billion of stimulus measures in the past year to lift the country’s economy from a recession. In the third quarter, the economy shrank 1.2 per cent, the least in three quarters.

Najib led a fact-finding mission to New York last month to meet business leaders and US investors, and found they wanted better governance, continued liberalization and more large-capitalized companies such as wireless carrier Maxis in which to invest, Bernama news service said November 24, citing the politician.

“I sense a return of confidence on the part of our private companies to invest and do deals in response to the various new liberalization measures announced by the government,” CIMB Group Holdings Bhd. Chief executive officer Datuk Nazir Razak wrote in an e-mail.

CIMB, Malaysia’s second-largest bank, ranked first in underwriting equity and rights offerings this year, according to Bloomberg data. CIMB arranged the Maxis IPO.

The interest from global banks in Malaysia is “not surprising” given the potential number of deals, Nazir said. -- Bloomberg