Maybank sets rights issue price

Malayan Banking, or Maybank, has fixed the issue price of its upcoming M$6 billion ($1.6 billion) rights offering at M$2.74 per share, offering shareholders a chance to increase their holdings at a 43.2% discount to last Thursday's close of M$4.82.

The price, which was announced before the opening of trading Friday, represents a 34.4% discount to the theoretical ex-rights price of M$4.17 per share, which is in line with the Malaysian bank's earlier promise of a 30%-40% discount. It is also on par with DBS's $2.7 billion rights issue in January, which was offered at a 35% discount to the theoretical ex-rights price. The ongoing rights issues for Singapore developer CapitaLand and Indonesia's Bank Danamon are also offered at discounts of 35% and 34%, respectively, while CapitaMall Trust is offering its shares at a 28.7% discount to the theoretical ex-rights price.

It is somewhat surprising that Maybank has chosen to fix the price this early since it could result in the rights offering becoming less attractive should the market take a turn for the worse between now and the opening of the offer. The deal will need to be approved by existing shareholders at an extraordinary general meeting, which sources say is currently expected to be held on March 25 and subscription isn't due to open until early April. And since the bank chose not to set a price when it first announced the offering on February 27 it could have waited until closer to those dates before committing.

However, people close to the bank -- Malaysia's largest lender by assets -- say it wanted to firm up the underwriting to ensure there was no uncertainty that it would be able to raise the full amount. This also means that it can include the specific price in the offering circular that is about to be sent out to its shareholders this week.

The announcement met with a negative reaction in the market with the stock losing another 5.8% on Friday. (The Kuala Lumpur stockmarket was closed yesterday for a public holiday). The share price has fallen every day since the rights issue was first announced on February 27, shedding a total of 11%. Some of this may be due to the significant dilution that will have to be digested by investors who choose not to take up their entitlements in the offering, but Maybank is obviously also affected by the general slump in global stockmarkets in reaction to recent data suggesting a worsening economic situation.

In Malaysia specifically, the government is due to announce a second stimulus package today to try to prevent the economy from sliding into a recession. The package is expected to be larger than the M$7 billion economic stabilisation package unveiled in November and the consensus appears to be that it will contain M$10 billion to M$15 billion of new measures. According to economists at Citi this would translate into roughly 1.5%-2% of GDP.