Malaysia’s Global Sukuk Bonds Rated Investment Grade

May 19 (Bloomberg) -- Malaysia’s planned global Islamic dollar bond, its first sovereign debt offering in almost eight years, was assigned preliminary investment grade ratings of A- by Standard & Poor’s and A3 from Moody’s Investors Service.

The Southeast Asian nation is tapping the international debt market for the first time since 2002 as the government aims to increase development spending to boost economic growth. Sales of notes that comply with the religion’s ban on interest rose 24 percent so far in 2010, the most in three years, as the European financial crisis bolstered demand for alternative investments in emerging markets.

Malaysia had a budget deficit of 7 percent of gross domestic product last year, compared with 13.6 percent for debt- stricken Greece, 11.2 percent for Spain and 9.4 percent for Portugal. For an emerging market, Malaysia has a “a strong credit standing,” according to Exotix Holdings Ltd. in London.

“There will be demand because Malaysia’s back in the market for the first time in a long time,” Stuart Culverhouse, chief economist at Exotix Holdings, said in an interview yesterday. “It is seen as a country that’s followed sound economic policies, economic orthodoxy with strong institutions and with an established track record of paying its debt.”

‘Strong External Position’

The country starts marketing the sukuk notes from today to investors in Asia, Europe, the U.S. and Middle East, with Barclays Capital, HSBC Holdings Plc and Malaysia’s CIMB Group Holdings Bhd. lead arrangers, a banker with knowledge of the matter said yesterday, declining to be identified. Malaysia is the world’s biggest market for Islamic bonds, which are backed by physical assets and pay profit rates instead of interest, which is prohibited by Shariah law.

The rating “reflects the strength of the transaction documentation, including the lease and purchase undertaking agreements,” S&P said in a statement released late yesterday.

“Malaysia’s sovereign creditworthiness has been underpinned through the global crisis by its strong external position, deep and liquid domestic capital markets, and a strong and well managed financial system,” Aninda Mitra, a vice- president and Moody’s lead sovereign analyst for Malaysia, said in a report today.

‘Better Reception’

The $195 billion economy is forecast by the central bank to expand as much as 5.5 percent this year after emerging from its first recession in a decade in the fourth quarter. Prime Minister Najib Razak plans to unveil a new five-year development plan in June.

Yields on bonds in Greece, Portugal and Spain have surged as the countries struggle to rein in budget deficits, which are the largest in the European Union, and finance debt obligations. Greece will tap emergency loans from the euro region today to repay 8.5 billion euros ($10.5 billion) of 10-year bonds.

“When there’s a drop in confidence in the traditional bond market, when there is concern with the traditional bond or traditional credits like in Europe, people look for diversification and therefore bonds from the Far East and Islamic bonds can get a better reception in this environment,” said Nazir Razak, chief executive officer of CIMB Group Holdings, Malaysia’s top underwriter of sukuk notes last year.

Pricing Benchmark

The latest sovereign issue will provide a new benchmark for pricing bonds in Malaysia as the only other outstanding global note matures next year. The 7.5 percent security maturing in July 2011 yielded 1.21 percent yesterday, 59 basis points less than at the end of last year, according to data compiled by Bloomberg.

“Just because it’s a sovereign debt doesn’t mean that it’s risk free,” Ali Khan, head of cash-equity trading at Dubai- based Arqaam Capital Ltd., said in a telephone interview yesterday. “Even sovereign debt right now will have to pay more in the debt market because of the prevailing scenes surrounding sovereign debt in Europe and the United Arab Emirates.”

Malaysia May Raise $1.5 Billion From Bond Sale, Official Says

By Soraya Permatasari, 

--With assistance from Dana El Baltaji in Dubai. Editor: Simon Harvey, Barry Porter
To contact the reporter on this story: Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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Invest In What You Know

Investment Strategy   

Have you ever known certain products would be successful months before they became a hit? Find out how to profit from your intuition.

Investing can be extremely intimidating, from the serious newspaper articles detailing how millions will no longer be able to retire, to the angry man on television yelling about dividends, it's no wonder so many of us are hesitant to take the leap into the money market. For many otherwise intelligent, confident people, the idea of risking hard-earned cash in a market they don't truly understand just doesn't make sense. But the truth is, you may have an advantage over Wall Street brokers when it comes to investing--your personal area of expertise.

Do as Buffett Does

You've probably heard of the legendary investor Warren Buffett, who is currently the third-richest man in the world, according to Forbes. What sets Buffett apart is how many people turn to him for investing advice--and one of his personal investing rules (right after "never lose money") is if you don't understand a business, don't buy it.

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No matter who you are, there is something you are interested in. And no matter what that is, you can translate that interest into valuable trading information. If you are a tech geek, you'll know if fragmenting Linux will help it to compete with Apple's ( AAPL - news - people ) range of products. If you worked on the oil rigs in Alberta, you'll know which companies were efficient enough to have a shot at major growth over the next few years.

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Related Video: Best High-Tech Master's Degree

Comments

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Don't just consider the companies benefiting directly from a new trend or product. The next big thing also affects secondary players in a given market in a trickle-down effect you can cash in on. Or, consider products you think will be a bust and either short the stock or invest in the rival. For example, if you think Google's ( GOOG - news - people ) "iPad killer" just isn't going to cut it, you can invest to reflect that opinion.

The Bottom Line
Investing doesn't have to mean researching banks or investment firms--although it certainly can. By focusing your stock picks on companies and industries that interest you outside of your financial obligations, you will likely make more informed choices. Keep in mind that knowing an industry should not be an excuse to avoid doing any research into a specific company. Even if your insider knowledge gives you a leg up, every investor should hold themselves responsible for doing their due diligence. And who knows, you may even discover that investing can be fun!

BY Erin Joyce

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Yahoo Buys Online Content Factory for $90 Million

Yahoo has joined the race to mass-produce content for the web with its purchase Thursday of Associated Content for a rumored $90 million.

Associated Content, like Demand Media and AOL’s new Seed project, relies on thousands of freelancers to write and film how-tos, profiles and top-whatever lists for web publication — with help from search algorithms to determine what content should be created next. Associated Content has been able to attract brand-name advertisers to its site, especially for how-to articles like this one on choosing the right-sized hammer, which are surrounded by ads from Coldwell Banker and Fidelity.

“Combining our world-class editorial team with Associated Content’s makes this a game changer,” said Carol Bartz, Yahoo’s CEO. “Together, we’ll create more content around what we know our users care about, and open up new and creative avenues for advertisers to engage with consumers across our network. These are important aspects of building engaging consumer experiences on Yahoo, and one of the reasons why we’re one of the most visited destinations online.”

Yahoo has long considered itself to be a provider of higher-end media, combining news and features written by its own staff with paid news feeds, and then adding curated links to other sites’ content. It’s not clear if Associated Content will be rolled into Yahoo’s site or if it will continue operating on its own, gaining page views and revenue through visitors stumbling on content through search. If not careful, Yahoo runs the risk of devaluing its brand and creating so much ad space that it can’t continue to charge premium rates to advertisers.

Associated Content has more than 16 million unique users per month, according to Comscore, and the editorial staff “reviews more than 50,000 pieces of content per month, including articles, images, audio and video,” according to the press release announcing the acquisition.

Associated Content considers itself to be a step above Demand Media, which gained much attention for its use of search logs to figure out what obscure topics users were looking for — but couldn’t find — and then creating cheap content to fill that hole. Yahoo says it will use its search engine to help identify topics that users and advertisers care about.

In announcing the purchase, Yahoo says it will expand Associated Content’s operation globally and will close the sale in the fall. It did not disclose the purchase price, but veteran Yahoo reporter Kara Swisher reported the company paid $90 million.

Photo: Yahoo in Times Square
Henrique Vicente
By Ryan Singel
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