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Published: Monday January 16, 2012 MYT 3:35:00 PM

Bank says global sukuk issuance to grow to US$44bil this year


KUALA LUMPUR: HSBC Amanah expects global sukuk issuance to grow to US$44 billion in 2012 from US$26.5 billion last year.

Malaysia was forecast to account for 60 per cent of the total while the Middle East and North Africa (MENA) region 32 per cent, the bank said in a statement today.

It also said governments and government-related entities were likely to account for 50 per cent while the finance and corporate sectors 25 per cent each.

In the statement, Mohammed Dawood, Managing Director of Islamic Global Markets for Europe Middle East and Africa at HSBC Amanah, said: "We expect a significant increase in sukuk issuance this year because it performed well against the financial crisis and liquidity crunch in 2011.

"The sukuk market is already off to a strong start in 2012. This January is the busiest we've seen in this market. Demand still outstrips supply."

He also said investors favour sukuk because it was less volatile than conventional issuances, especially in the last four months of 2011.

"Issuers on the other hand, like sukuk because it gives them access to a new investor base," he said.

Meanwhile, Rafe Haneef, HSBC Amanah Malaysia Bhd Chief Executive Officer and Managing Director of Islamic Global Markets for Asia at HSBC Amanah, said: "Infrastructure projects in Asia and the Middle East are likely to be the other driver of sukuk issuances in 2012.

"Malaysia's biggest toll expressway company has recently issued a US$10 billion sukuk. Sukuk is a viable tool but we need longer tenor ones that extend to 10 years and beyond for these long-term projects."

He also said Islamic finance was an ideal bridge for capital flows between Asia and the Middle East.

To encourage more Asian sukuk issuances, however, there was a need to help Middle Eastern investors understand Asian sukuk and capital markets better.

"If investors from the Middle East can become familiar with Asian sukuk, this can be a driving force for more of its issuance in Asia," he said.

"More can be done to strengthen the capital connectivity between Asia and the Middle East. We need to help increase Asian investors' appetite of for international sukuk beyond just local currency issuances," he said. - BERNAMA

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