Malaysia debt markets report: Kexim profile

 Treasurer interview

Jin-Kyung Kim is better placed than anyone to talk about the opportunities for foreigners in Malaysian ringgit debt. He’s the executive director of Korea Export-Import Bank (Kexim), spearheading its funding initiatives, and Kexim is so far the only foreign bank or corporate issuer to have raised funds in ringgit twice.

When it did it the first time, with a RM1 billion five and 10 year deal in 2008, it opened the markets for a cluster of other Korean issuers to follow, having demonstrated the strong institutional demand that existed in Malaysia for the country’s paper. Then, when it came back with a RM220 million three-year deal early in 2009, it demonstrated that the markets were not now closed to foreigners as everyone had assumed.

What’s in ringgit for Kexim? “The first thing for us is diversifying the funding sources,” says Kim. “That is a most important factor for us. Also, it has offered better pricing than other major markets.”

Kexim has been able to demonstrate a depth in the Malaysian market that other issuers may not have imagined was there, given the range of its funding excursions to date. “We have done three years, five years and 10 years, so I think the Malaysian market is fairly deep in terms of its size and its maturity,” Kim says. “There is good product up to 10 years.”

While Kexim clearly got good competitive pricing in its first deal, it was more of a surprise to the market to see it return this year at a time when it was thought that the dollar-ringgit swap had made pricing uneconomical. “It does vary a lot in terms of the swap pricing to dollars, and it depends on the market situation,” he says. “We have to see that and the Malaysian bond market together. But when we did our issues the pricing was still favourable.” Including in the second deal?  “Yes, it was always competitive, because the other markets are still very expensive. The Malaysian market became more expensive than last year, but compared to other markets it still offered slightly better pricing.”

Kim says that fund managers bought the bulk of Kexim’s paper, along with a large national pension fund and some interest from banks and insurers. Comparing the two deals for investor appetite, “I really didn’t find much difference,” Kim says. “But obviously we did much shorter dated paper this year, which appealed less to insurance companies, so there were less of them in the second deal.”

When Kexim roadshowed in Kuala Lumpur in between the two deals, it was widely noted that it brought a member of Korea’s ministry of finance team with it. “After the turmoil it’s very important to understand what the government is doing to revitalise the economy,” he says. “I think it makes it more reliable when the government official is there to tell the story about Korea himself rather than telling it through us.” Kim says there were “many questions” and that it presented “the first opportunity this year for the government official to meet the investors there directly.”

For his part, Kim thinks Korea’s dramas have been overstated. “I think Korea is in a much better situation that the outside media is reporting,” he says. “The position for all the banks is relatively good. There was some concern about the exchange rate but now it has come down considerably.” He adds: “The financial market is quite good but we are all preparing for the worst that there may be some corporate failures.”

Kexim’s first issue opened the floodgates for other issuers but at the time of writing the second deal had not had quite the same galvanising effect on international issuers. Nevertheless, Kexim itself is likely to be back in ringgit before too long; it has a Rm3 billion programme medium-term note programme in place and has so far only utilised about RM1.2 billion of it. Asked if we should expect to see Kexim in this market again, Kim says: “Yes, if there is an opportunity.”

And what challenges come with being first? “Getting all these approvals took time, and there were some more things to do, but the Malaysian government was very responsive to our issue, and helped us develop a new market for Korean issuers,” says Kim. “It wasn’t that difficult, and it was quite exciting at the time.”