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Malaysian Bond Market Analysis

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The growth of the Malaysian bond market is started in 1970s. It was exactly when the government commenced issuing bonds to gather the huge funding requirements of the country’s development plan at the period. According to Bursa Malaysia (2014), “Bonds are fixed income securities issued to lenders of long-term loans, with a maturity date.”
In the middle of 1980s, the private sector supposed a more significant purpose inside the deliberate improvement of the Malaysian market, beside the objective of making it the main driver of development as well as finance. Throughout that era, the corporate sector was seriously contingent on finance from banks, which controlled the government to follow the progress of the corporate bond market such as a crucial …show more content…

Investing in the bond market will generate high yield bonds which can improve current income. Bonds are relatively safe investment as it pay fixed income payment regularly. For example, retirees will invest in bond market as they depend on the interest income for their living expenses and cannot afford to lose any of their savings (CNN money, n.d.). Sometimes, investing in bonds is better than the bank. The interest rates of the bonds are somehow greater than rates paid by banks. Hence, it will turn the retirement savings into retirement income. Besides, bonds are more stable than stocks as investing in bonds are unlikely to lose money compared to stocks. This is because the bonds are fairly predictable and hence bondholders can predict their investment earnings and expected return. If the company goes bankruptcy, bondholders will have the priority over shareholders to receive payment (Randolf, n.d.). Therefore, bondholders still able to get their money back. Moreover, some bonds are tax-exempt which may increases the value of the bonds. Interest income will be exempted from state and local taxes from those securities issued by government units. For example, municipal bonds are tax-exempt which is free from federal income taxes. In many cases, investors will invest in bonds market to reduce the risk and generate greater income. For example, the corporation will invest in …show more content…

There are several regulatory bodies that have put significant effort in encouraging competition, maintain stability and fair trading of Malaysian bond market such as Bank Negara Malaysia and the government agencies. On 1 March 1993, the SC (Securities Commission Malaysia) was established and became the single regulator for the corporate bond market when it moved towards a full disclosure-based regulatory approach with the issuance of the Guidelines on the Offering of Private Debt Securities (PDS Guidelines) in 2003 (Securities Commission Malaysia, 2014). These guidelines published by SC helped in maintaining stability of the market. In addition to the guidelines, SC liberalized the Central Depository System (CDS) account requirements in October 2005, widening the group of those allowed to hold securities on behalf of others to increase trading efficiency. These exempt-authorized nominees are now allowed to hold securities in omnibus CDS accounts. Another important function of SC is approving authority for corporate bond issues. Strong emphasis is given to ensuring full and adequate disclosures of factual information to potential investors to support investor’s well-versed decision making in respect of their investments

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