Business

Wednesday December 14, 2011

Malaysia to continue global sukuk market domination

By LIZ LEE
lizlee@thestar.com.my


KUALA LUMPUR: Malaysia is expected to continue its strong 60% contribution to global sukuk issuance next year, bolstered by projects under the Economic Transformation Programme (ETP).

HSBC Amanah said that this year had seen significant growth in sukuk, principally driven by issuance out of the country.

“This is by far the best year since 2002. Over 60% of total global sukuk issuance come from Malaysia,” HSBC Amanah chief executive Rafe Haneef said.

He believes that the ETP and other projects would continue to drive the sukuk market.

“Most of (the projects) are funded by sukuk which is in the local currency and by the sheer size, I believe there will be around 60% coming from Malaysia for next year as well,” he said after launching the nation's 13th HSBC Amanah branch here.

HSBC Bank Malaysia Bhd chief executive and HSBC Amanah global chief executive Mukhtar Hussain said that the level of interest in the sukuk market remained high and the prospects of the industry overall was positive. He added that HSBC was currently the largest international sponsor of global sukuk and it was expected to hold that market position next year.

“The share of sukuk financing within the overall share of capital markets financing will continue to increase and you'll also see diversification not only in the issuance among sovereign community but also by corporations and banks,” he said.

Rafe also said that HSBC Amanah was looking to diversify its products.

“We need to look at diversifying our products to more investment products like real estate investment trusts and retail bonds next year.

“I think Malaysia is focused on opening up the retail bond market so that you can monetise the sukuk into smaller sizes and distribute throughout our retail branches,” he said.

He said that sukuk issuance had been mostly at the institutional level so far and that “the idea is to democratise sukuk so that it can be reached by the retail investors.”

On the contribution of the Islamic finance division to the HSBC group, Mukhtar said it “forms a larger component of our business” and was proportionate to the number of HSBC Amanah branches currently.

There are 13 HSBC Amanah branches of the bank's 55 branches nationwide. The bank aims to open another 13 Amanah branches by next year, two of which will be opened this month.

On outlook of the banking sector, Mukhtar said: “(It) will continue to grow but it is obviously moderated by global circumstances.

HSBC remained optimistic about the future over the medium term but expected some challenges in 2012, he said, adding that the bank continued to project a gross domestic product growth of 4.5% to 5% for Malaysia next year.

“For HSBC Amanah, we have grown around 12% to 13% this year and aim to grow within the 10% range next year. But it all depends on how the crises in Europe and elsewhere play out,” Mukhtar said.

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