From domestic to international issuance

When Cagamas, Malaysia’s largest non-governmental local issuer of debt securities, decided to diversify its funding sources beyond its borders, the national mortgage corporation knew that long-term relationships with international investors would be critical to its success.

According to President/CEO Chung Chee Leong, discussions held with potential investors in 2012-13 confirmed that secondary market liquidity was a key pre-requisite to their participation in Cagamas’ planned EMTN (foreign currency medium term note) programme.

The AAA-rated firm, established in 1986 to support affordable mortgage availability and expand home-ownership in Malaysia, appreciated the importance of liquidity to its future cost of funds and ability to frequently tap international investors. As such, Cagamas took a number of steps to ensure this criteria was met. These included: 70% distribution to non-Malaysian investors; inclusion of its securities on major indices; and ensuring the eligibility of its paper as collateral in repo transactions. This last step was facilitated by its choice of Euroclear as one of the international central securities depositories for the planned transactions.

So far, the strategy has been an unqualified success. Launched in 2014, the USD and CNH tranches of the EMTN programme (totaling USD2.5 billion) were four times oversubscribed. Moreover, international investors have further demonstrated their support for Cagamas by increasing their holdings of the firm’s ringgit-denominated debt securities.

For Mr. Chung, the firm’s efforts to support relationships with international investors must continue. “To purchase mortgages from lenders on a regular basis, we need frequent access to competitively-priced funding in the international markets. Investors understand and like our business model, but we must continually optimise our appeal through constant, positive engagement to support secondary market liquidity.”

“To support our strategy, we needed a partner with global relationships and capabilities, a robust infrastructure, and the ability to respond flexibly to market dynamics”.

MR CHUNG CHEE LEONG, PRESIDENT/CEO, CAGAMAS


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When Cagamas, Malaysia’s largest non-governmental local issuer of debt securities, decided to diversify its funding sources beyond its borders, the national mortgage corporation knew that long-term relationships with international investors would be critical to its success.