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.
