M`SIA NEEDS TO ESTABLISH BOND INSURANCE MARKET

KUALA LUMPUR, April 20 (Bernama) -- Malaysia needs to establish a bond
insurance market to lift investor confidence and spur the bond industry, said
Edward I. Altman, finance professor of New York University.

He said the country's corporate bond had dried up to the point where no
issuance is taking place, except at the AAA and AA ratings level.

"There should be some sort of confidence building mechanism for the market,"
he told reporters at a seminar on current conditions, outlook and managing
credit risk in a global crisis organised by RAM Holdings Bhd, here.

Altman said the market requires solvent insurance or government insurance
so that in the event it fails, investors would be repaid.

"The government should play a leading role in realising this," he added.

He pointed out that the proposal to establish a government guarantee fund or
insurance in the country, would bring a positive effect to the market, only if
the premium to be paid by the company is reasonable.

"Obviously if you charge too high a rate, then it becomes extremely
difficult for the company to pay," he said.

Meanwhile, Altman urged rating agencies to be timely in the monitoring of
bond issuance and not wait too long for the re-rating of companies' bonds.

"If it is not timely, then the market would lose confidence in rating
agencies and the whole system. That was what happened in the United States in
respect of the mortgage backed security market," he explained.

-- BERNAMA