Belt And Road Initiative To Give Important Financial Implications For Investors -- HSBC

KUALA LUMPUR, July 11 (Bernama) -- China’s Belt and Road Initiative, which focuses on physical infrastructures like railway lines, ports and highways, has important financial implications for investors in Malaysia, said HSBC Bank (M) Bhd. In a statement Tuesday, the bank said, the initiative, which was announced in 2013, would galvanise infrastructure constructions as far afield as South-East Asia, West Asia, Africa and Europe. “There are already many significant Chinese investments in major Malaysian infrastructure projects. “One such example is the strategic partnership between Melaka and China’s Guangdong province, which aimed to promote various projects that would help develop the state as a strategic port and hub along the Belt and Road route,” it said. According to Asian Development Bank estimates, about US$26 trillion (RM112 trillion) would be needed for infrastructure development in Asia between 2016 and 2030, as developing nations aimed to raise productivity and deal with growing urbanisation and the impact of climate change, the bank said. (US$1 = RM4.29) HSBC Bank said sovereign wealth funds had been deploying more of their assets to global infrastructure investments, especially in Asia. “The steady return potential of infrastructure investment was also a good fit for Asia’s middle class investors. The expected growth in capital-raising activity is also good news for the development of some of the smaller markets along the Belt and Road route, as many emerging local-currency bond markets have grown rapidly in recent years,” it said. It said the Malaysian bond and sukuk market also continued to play a major role in supporting economic growth by financing business expansions and infrastructure developments. It said Malaysian bonds had seen strong demand from local and foreign investors who had been searching for higher-yielding assets after building up significant cash positions over time. “Foreign interest had resulted in RM6.8 billion and RM10.1 billion of inflows to domestic debt markets this year in April and May respectively,” it said. Meanwhile, HSBC Malaysia Chief Executive Officer, Mukhtar Hussain, said it would require all available sources of capital of the private and public sectors to finance the colossal need for transport, telecommunications and energy infrastructure. “But it will also generate a broad spectrum of opportunities for local and international investors and stimulate capital markets development in many Asian markets, where bank lending still tends to dominate financing. “Infrastructure projects, by their very nature, are large, complex, often multi-decade ventures that can involve different kinds of funding over their lifetime. “So the Belt and Road fund-raising will need to come from the full range of sources – including bridge financing from banks, equity capital from governments, funds and public and private equity markets, and long-term bond issuance from private and public sector institutions,” he said. He said infrastructure projects and the stable, long-term returns they tended to provide also attracted investors looking to diversify their holdings. Mukhtar said that increased capital-market activity could also prompt more cross-border regulatory coordination among markets in South-East Asia or Central Asia, with more cohesion in areas like documentation, taxation, foreign exchange regulation and credit ratings. -- BERNAMA