Economists: Issuance of RM500m Sukuk Prihatin a positive move

Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah (middle) and Prime Minister Tan Sri Muhyiddin Yassin witnessing the launch of Sukuk Prihatin at the Ministry of Finance in Putrajaya August 18, 2020. ― Bernama pic
Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah (middle) and Prime Minister Tan Sri Muhyiddin Yassin witnessing the launch of Sukuk Prihatin at the Ministry of Finance in Putrajaya August 18, 2020. ― Bernama pic

KUALA LUMPUR, Aug 19 ― The issuance of RM500 million Islamic Sukuk Prihatin is seen as a positive move to support the economy by tapping into cheaper domestic funding and taking advantage of the healthy liquidity environment.

AmBank chief economist and head of research Dr Anthony Dass said the Sukuk is attractive and will be appealing to investors as it was issued by the government which could be considered as a risk-free asset or equivalent to Malaysian Government Securities (MGS) and Government Investment Issue (GII) bonds.

“The corporate sector is expected to take up the bulk of the issuance compared to the retail, owing to the relative placement capacity between corporate and public.

“Besides, the current deal provides room for them to diversify their portfolio with risk-free asset status,” he told Bernama.

Dass said that with room for additional Overnight Policy Rate cut added with benign inflation environment, the Sukuk remained attractive from additional yield rally momentum and a net positive yield perspective.

He noted that although investing into the Sukuk bond is seen as an investment opportunity, there are still opportunities to invest in other investment products that may provide equivalent returns or higher.

“In short, the Sukuk Prihatin can be viewed as a two-pronged approach. First, it helps the government to support the economy. Although it may not necessarily be sufficient to achieve all the objectives, it can be viewed as a prudent approach adopted by the government.

“Secondly, it also creates an opportunity for capital gains with the low entry cost, hence, appealing for investors to subscribe to this bond,” he commented.

Meanwhile, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid viewed that the Sukuk Prihatin, which gives a two per-cent profit rate, is considered attractive as it is higher compared to fixed deposit rates.

Furthermore, it is deemed zero credit risks since the instrument is issued by the government and it is denominated in Malaysian ringgit, he said.

“From the investors point of view, investing in Sukuk Prihatin does have the business case since one would need to diversify their investment and certainly, having high-quality assets would be good for capital preservation.

“Meanwhile, leveraging digital space for distribution would mean better access for the investors, in particular for those who are IT savvy and perhaps for the young investors as well, he added. ― Bernama

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