Business unusual
09 March 2009
Prudence underpins stability in Malaysia’s banking sector
Last year was a shock to the world economy. With toxic financial bubbles broken, the impact spread to every region, causing the global slowdown, and the deeper crisis that is the loss of investor confidence.
Emerging markets were not left unscathed by the global volatility. Falling exports and high commodity prices pushed many of the most robust economies to the brink of crises.
With limited exposure to the credit crunch and a strong banking system, Malaysia joined most Asian economies in announcing swift and bold measures to alleviate liquidity.
| 8 Oct 08 | Bank Negara Malaysia (BNM) announced that it is ready to provide liquidity, whenever necessary, to financial institutions under its purview |
| 16 Oct 08 | Access to BNM's liquidity facility will be extended to insurance companies and takaful operators regulated and supervised by the central bank |
| 16 Oct 08 | BNM said that it stands ready to guarantee interbank obligations of banking institutions if the need arose |
Source: Where Asia Stands Now, an HSBC Global Research report (Flashnote, an HSBC Global Research report, 11 Dec 2008)
The silver lining
Behind every crisis is an opportunity, and there will be those who emerge from the crisis in a stronger position. Malachy McAllister, HSBC Malaysia's Managing Director of Global Banking, said that although origination volumes were reduced, "2008 was a good year for Global Banking and Markets in HSBC Malaysia."
Piyush Kaul, Treasurer for Global Markets Malaysia, agreed. "True, the investment climate was weak due to the credit crisis. However, there were some good opportunities as well, provided there was discipline in pricing and we were selective about deals pursued."
"It distinguished us from the pack. At the height of the crisis, we were able to execute landmark transactions such as the State Bank of India deal (see sidebar)." This bond was the first cross-border issuance for India, from a country whose sovereign rating was lower than Malaysia's. More importantly, it was an example of how Malaysia's bond market has developed to maturity.
| Best Foreign Commercial Bank - FinanceAsia Country Awards for Achievement | |
| Best International Trade Bank in Malaysia - Trade Finance |
Source: HSBC
Potential opportunities
The launch of the Malaysia International Islamic Financial Centre (MIFC) in 2006 was a strategic initiative to encourage the growth and development of Islamic finance. "Islamic finance is a niche that Malaysia can genuinely claim. It strengthens Malaysia's position as a regional centre of excellence in financing", said Mr Kaul.
"The good performance of HSBC Malaysia is also due to the key capabilities of our Islamic subsidiary in Shariah-compliant products, domestically and cross-border. The MRCB and Cagamas deals are good examples of Islamic financing."
Deal focus: State Bank of India’s local currency bond issuance in Malaysia
HSBC acted as sole lead manager and bookrunner on the MYR500 million five-year fixed-rate Malaysian ringgit-denominated bond issue for State Bank of India (SBI).
Despite volatile global market conditions, there was strong demand from investors. The transaction closed in March 2008.
SBI is India's largest bank, and is majority-owned by the Government of India. The bond issue was rated AA+ by Malaysian Rating Corporation (MARC), with HSBC acting as sole ratings adviser in this respect.
The SBI ringgit issuance proved to be an exceptional transaction.
- First Indian cross-border bond issue of 2008
- First Indian borrower to successfully price an MYR bond issue
- First MYR bond by a foreign borrower from a country with a lower sovereign rating than Malaysia
Malachy McAllister
As Managing Director of Global Banking of HSBC Bank Malaysia, Malachy McAllister manages the Global Banking business in Malaysia, which includes transaction banking, credit and lending, and client management for leading Malaysian and multinational corporates and financial institutions. A physics and mathematics graduate from Dublin University, Mr McAllister has spent 18 years with HSBC Group. He first joined HSBC in 1990 in Hong Kong and later served as Managing Director and Head of Corporate Banking, HSBC Bank China before taking up his current position in Malaysia.
Piyush Kaul
Piyush Kaul has been Treasurer for Global Markets, HSBC Bank Malaysia since April 2006. He is responsible for the Global Markets business in Malaysia, which provides products and services in foreign exchange, interest rates, derivatives, debt capital markets, and risk management. He holds a Bachelor of Engineering degree from University of Roorkee (now Indian Institute of Technology, Roorkee) and a PGDBM (Finance and Marketing) from Xavier Labour Relations Institute. Mr Kaul has over 15 years’ experience in the financial markets industry.
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