Thursday April 26, 2012
Mísia leads in sukuk
By THOMAS HUONG
KUALA LUMPUR: Malaysia would remain as the world leader in sukuk issuance, which is on course for another record-breaking year, according to Islamic finance experts.
US-based Global Studies Institute director Dr M. Mahmud Awan said that in the first quarter of 2012, global Islamic bond issuance reached a record US$43bil (RM131.7bil).
“Of this, Malaysia has about US$30bil (RM92bil),” he said on the sidelines of the Sukuk Outlook Conference organised by Asian Strategy and Leadership Institute.
Mahmud said the global sukuk market was forecast to reach US$125bil (RM382.8bil) this year.
According to data compiled by Zawya Sukuk Monitor, a record breaking US$84.4bil (RM258bil) of sukuk were issued globally last year, which was an increase of 62% compared with 2010.
“Malaysia has an overall enabling tax and economic environment that makes the country an attractive market to issue new sukuk. We are beginning to see more GCC (Gulf Cooperation Council) countries offering sukuk in Malaysia,” said Mahmud.
One bank-backed analyst concurred, saying: “Malaysia continues to be the leader, thanks to its advanced regulatory syariah-compliant management framework and attractive tax accomodations.”
The analyst pointed out that Malaysia had 72% of global sukuk issuance last year, followed by the Middle East (22.5%) and Indonesia (2.9%).
Mahmud also said the relative cost of sukuk financing or borrowing on a long-term basis was relatively cheaper in Malaysia compared with for conventional bonds.
“So, there is an attraction for issuers to use sukuk. The sukuk structure requires strict syariah compliance. Not every issuer has the competency or expertise for that. The underlying structures that Malaysia has perfected, such as the murabahah-based sukuk, are becoming more popular on a global scale,” said Mahmud.
He foresees Saudi Arabia and the United Arab Emirates to have larger-sized sukuk offerings in the next quarter.
According to Mahmud, there are increasing sukuk issuances from Saudi Arabia and the typical sizes are as high as US$6bil (RM18.4bil).
“The capacity of Saudi Arabia is at least 10 times that of Malaysia in creating additional fixed-income securities. It is just that up till now, Saudi Arabia has not taken the sukuk route as aggressively as Malaysia has done over the last 10 or 15 years.”
Mahmud reiterated that Saudi Arabia was destined to play a much bigger role in the Islamic financial services industry in 10 to 15 years.
“As far as the investor community is concerned, Saudi Arabian banks are the largest Islamic banks. It is their appetite for sukuk to satisfy their liquidity management needs that is driving the sukuk market.”