Kuala Lumpur: Malaysia has delayed making a decision on the size and timing of its first sale of Islamic bonds in eight years due to unstable market conditions.
The decision won't be made this week because of swings in emerging market assets, said one of two people commenting on it, both of whom declined to be identified. Malaysia's Second Finance Minister Ahmad Husni Hanadzlah did not answer calls to his mobile phone seeking comment.
The government had planned to determine the final size of the sukuk notes this week after completing an international roadshow to promote securities to investors in Asia, the Middle East, Europe and the US.
Meanwhile sales of sukuk, which comply with the religion's ban on interest, have risen 31 per cent so far in 2010, in comparison to the same period last year.
"It's still a 50:50 chance that Malaysia will try to tap in[to] such a shaky market," said Sergey Dergachev, who helps manage about $6 billion of emerging-market debt at Union Investment in Frankfurt.
Emerging-market assets have slumped over the past month as the EU debt crisis fueled concern that the global economic recovery would stall. The extra yield investors demanded to hold debt of developing nations over US Treasuries, widening 25 basis points in the past week to 345 basis points Tuesday, according to JPMorgan Chase & Co's EMBI+ Index.The sukuk deal is subject to stable market conditions and it takes time for Middle Eastern investors to process any purchases, said the other unnamed person with knowledge of the matter.
Malaysia is turning to the international debt market for the first time since 2002 as it aims to increase development spending and boost economic growth. Indonesia, this month, trimmed the size of its planned sales of Islamic and yen-denominated debt because of concern that Greece's debt crisis will spread.
The MSCI Emerging-Markets Index has lost 17 per cent of its April 15 high, amidst concern that Europe's 750 billion euro ($922 billion) aid package for indebted nations will fail to prevent a global economic slowdown.
