How do you assess Cagamas' performance in 2018, and what have been the Company's main accomplishments?
In 2018, Cagamas' business strengthened, as it continues to provide liquidity and support to the local financial institutions via competitive cost of funding raised from a diversified pool of investors. We continuously aim to deliver greater value to financial institutions with the products, services and tools to enable them to serve the market more effectively and efficiently. In 2018, Cagamas had another successful year with total assets purchased amounting to MYR12.1 billion (USD2.96 billion) and total issuances worth MYR15.8 billion (USD3.86 billion), the highest since 2008, with 22 new Cagamas debt securities and five new Cagamas foreign currency issuance exercises. Issuances raised from the domestic market was MYR14.62 billion (USD1.13 billion) amounting to 93% and 7% or MYR1.13 billion (USD276 million) equivalents were raised from our multicurrency programs that were established in 2014. In July 2018, Cagamas' tenacity to engage with investors has resulted in the inaugural issuance of US Dollar floating rate notes (FRNs). The issuance also represented the Company's second foreign currency FRNs issued under Cagamas' multicurrency programs. The first FRNs was in the Australian Dollar, issued in October 2017. We have also issued similar financial products for Hong Kong Dollars (HKD). The Bond Pricing Agency Malaysia (BPAM) had at its annual BPAM Bond Market Awards awarded Cagamas with the award for Top Issuance—All and Top Traded Amount—Conventional categories for the year 2018.
How does Cagamas promote affordable housing?
Staying true to its mandate, Cagamas continues to play a role in government-initiated housing programs. In promoting homeownership, Cagamas' role is in the area of providing competitive, long term, and ready financing to financial institutions for house mortgages. Therefore, Cagamas has indirectly contributed to the “accessibility" of financing to provide homes to borrowers. Cagamas is actively involved in the My First Home Scheme (SRP) and the Youth Housing Scheme (SPB) introduced by the government. These affordable housing schemes provide support and financing options to eligible Malaysians to own their first homes. For both schemes, its sister company, Cagamas SRP Bhd acts as guarantor with the banks on financing above the 90% level. What that means is if an applicant obtains 100% financing, Cagamas SRP will guarantee 10% (from 90% to 100%) of the financing. The SRP has recently included first-time home buyers who are self-employed and with monthly household income of MYR5,000 (USD1,224) and below, to purchase their first home priced up to MYR300,000 (USD73,000). This scheme is packaged with a mortgage guarantee from Cagamas to extend the financing amount above the regular 90% to a maximum of 110%. As of December 2018, Cagamas has provided guarantee for housing loans totaling MYR3.7 billion (USD906 million), enabling about 18,000 individuals and households to own their first home.
Moving forward, Cagamas is taking steps to develop innovative products focused on Sustainable Investment strategy. These products seek both financial return and social good to bring about positive change. We believe that innovative schemes such as shared equity funding, Rent-to-Own and alternative funding options, such as crowdfunding and Affordable Housing Trust will enable targeted borrowers to be more 'bankable' when purchasing their first homes. In addition, this will enable socially responsible or green investors to include these products into their portfolio, broadening Cagamas' pool of investors. Cagamas also contributed to creating knowledge in affordable housing by jointly organizing the Conference on Constructing and Financing Affordable Housing across Asia with The World Bank Group.
Are you planning to further strengthen your Islamic finance offering to capitalize on your capabilities in this area?
Being the largest issuer of debt instruments in the Malaysian capital market, we have contributed to the strengthening of Malaysia's position as a global Islamic finance hub. Cagamas' Islamic finance offering will continue to progress alongside the conventional offering. In term of sukuk issuances, Cagamas will continue to issue to meet growing domestic demand as well as create international awareness and acceptance of sukuk. The existing MTN program is being upsized and will see additional features to the existing sukuk offered under the program, which is expected to provide more options to discerning sukuk investors. Cagamas is also working to add additional sukuk structures to the existing EMTN program to tap the international market. In line with Bank Negara Malaysia's guidelines for a value-based intermediation (VBI) initiative, the Company is embarking on purchasing loans and financing related to environmental and social impact projects, in addition to piloting the issuance of sustainability bonds and sukuk to fund these initiatives and mortgage REITS. With VBI, Cagamas aims to deliver the intended outcomes of Shariah through practices, conduct and offerings that generate positive and sustainable impact to the economy, community and environment, consistent with the shareholders' sustainable returns and long-term interests. Through this initiative, Cagamas will be able to broaden our investor pool to include socially responsible or green investors that would help open the market further.
How do you brand your services abroad and engage international investors?
A multi-pronged approach is adopted by Cagamas when it comes to our branding and engagement efforts that are done mainly through active participation in relevant speaking engagements to profile Cagamas and its product offerings to potential international investors around the Asian, Asia Pacific and EUMEA regions. Cagamas participates regularly in international investor non-deal roadshows and meetings to gain insights into investors' sentiments. These insights enable us to offer a range of products catering to both conventional and sukuk investors for the international bond markets. Corporate bonds and sukuk issued by Cagamas have tenures ranging from three months up to 20 years, which makes the papers attractive to different investor segments i.e. financial institutions, corporates, insurance companies, asset managers/trust funds as well as foreign investors Cagamas continued to be accorded the international rating of A3 by Moody's Investors Service (Moody's) and the domestic ratings of AAA by both Malaysian Rating Corporation Berhad and RAM Rating Services Berhad. This is a testament to Cagamas' consistent track record of strong governance, robust asset quality, stable profitability and prudent risk management. As one of the largest issuers of corporate bonds in the Malaysian capital market, Cagamas was accorded the Top Conventional Bond Issuer and the Top Traded Amount—Overall Category in 2018 by Bond Pricing Agency Malaysia (BPAM). The Company's contribution towards Malaysia's continued global leadership in the Islamic Capital Market was also recognised with the award of Issuer of the Year-Quasi Sovereign and the Best Quasi-Sovereign Sukuk for the dual reopening of 3-year RM475 million ringgit sukuk and RM525million ringgit Sukuk at The Asset Triple A Islamic Finance Awards 2018. Cagamas also received the Islamic Finance Advocacy Award (Capital Markets) 2018 at the Global Islamic Finance Award (GIFA) 2018. By being a market leader in the domestic market, Cagamas is able to sail into the international capital markets with minimal challenges faced. Moving forward, Cagamas hopes to enhance and strengthen our ability to raise funding from a broad group of fixed-income investors while reducing dependence on the domestic market. A steady increase in visibility among international investors will strengthen our position as a global Malaysian corporate issuer. As the market and investors evolve to demand a higher level of sophistication in products, Cagamas continues to proactively identify opportunities, provide innovative solutions, develop more diverse financial products and leverage on digital platforms.