Over 180 legal counsel and compliance professionals joined us recently for our inaugural “One Day Intensive” in Kuala Lumpur, where our lawyers and industry experts spoke about key developments and trends impacting businesses in Malaysia and ASEAN from funding challenges to regulatory compliance to successful fintech partnerships.
Below are highlights from one of our panels covering funding challenges.
The next set of articles will cover risk and compliance challenges in ASEAN followed by the growth of tech partnerships and key developments in structured and acquisition finance in Malaysia and ASEAN more broadly.
Funding challenges facing corporates in ASEAN: NO ONE SIZE FITS ALL?
“We do expect active domestic and international capital markets for funding opportunities, but this has to be preceded by greater geopolitical stability and a move toward more innovative products as the ASEAN region develops further.” Alex Stathopoulos, Partner, Allen & Overy
This panel comprising Partner, Alex Stathopoulous and Counsel Aloysius Tan along with Norfarasha Abdullah, Director Head, Debt Capital Markets at RHB Investment Bank and Adrian Chee, Partner at Adnan Sundra & Law discussed the recent trends and developments in relation to the growing multitude of funding options in debt and equity capital markets in ASEAN, with a particular focus on Malaysia.
Currently, the biggest challenge for the market is a rising interest rate environment and the intensifying trade war between the U.S. and China which is having a negative impact on the performance of equity and debt markets. At a local level, the panel highlighted that the recent regime change in Malaysia has muted both domestic and international capital markets activities for Malaysian corporates in the short term, as investors wait for greater clarity on new policy direction and implementation by the new Malaysian government. There are also signs that the regulators are looking to embark on more rigorous supervision and assessment of entities, such as increased diligence for initial public offerings that are looking to access the capital markets for funding.
Robust demand for innovative fundraising instruments
Attendees answered an onsite poll, asking for their views on which capital markets fundraising instruments will be the most robust for Malaysia corporates for the next 12 months. 25% of respondents indicated a move towards more “innovative” debt capital markets products in 2018. While plain vanilla conventional debt and plain vanilla sukuk were indicated by 15% and 17% of respondents respectively, we are seeing a growing trend in innovative products such as equity-linked (convertible bonds/exchangeable bonds), “green” and sustainable bonds/sukuks, and credit enhanced structures. Only 8% of respondents expect to see equity-linked fundraising instruments active over the next 12 months.
The panel also provided its views as to whether “green” sukuk/bonds had a discernable impact on pricing, beyond the environmental benefits that they provide, and if clear obligations are imposed on issuers who were bad actors in keeping the bonds/sukuk “green”.