Malaysia's emergence as a market of real potential has been one noticeable feature of 2005. Local rating agencies confirmed the fact with the release of new data estimating ABS issuance for 2005 will reach M$10 billion ($2.6 billion).

While still small compared to other markets, the figure easily tops the total for 2004 - M$2.8 billion (M$1.6 billion of which came from one deal) - and is almost three times greater than the previous best year, 2003, which saw volumes of just M$3.5 billion.

Equally significant, ABS accounted for 22% of all bond issuance in 2005, compared to less than 8% a year earlier.

Patrick Khoo, head of securitization at Commerce International Merchant Bankers, Malaysia's dominant arranger, says both supply and demand factors have caused the growth.

"We are seeing more issuers using securitization as a reliable and efficient source of medium-to-long term funding and capital management tool," Khoo said. "As for investors, there is still a substantial yield pick-up in ABS compared to straight corporate debt, with triple-A rated auto ABS, for example, trading close to the double-A corporate curve."

While spreads should contract next year as investors become more comfortable with ABS, Khoo predicts a 50% rise in volume in 2006, driven largely by bank and

government issuance.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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