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Saturday November 26, 2011

Robust outlook for sukuk

KUALA LUMPUR: The local sukuk market is expected to remain robust next year despite the global economic uncertainties, with the total issuance estimated to be between US$24bil (RM76.8bil) and US$30bil (RM96bil).

CIMB Islamic Bank Bhd CEO Badlisyah Abdul Ghani said that 2007 was a record year with total issuance at US$24bil (RM76.8bil) to US$25bil (RM80bil), adding that he expected a similar amount of issuance this year.

Speaking to reporters on the sidelines of the 16th Malaysian Capital Market Summit, he said to achieve US$24bil to US$30bil in sukuk issuance was something that was reasonable to anticipate.

The reason for this, among others, is both local and foreign investors as well as issuers have realised that Malaysia is the leading sukuk market to tap into.

In the first half of the year, a total of 19 sukuk issues were approved amounting to RM32bil, of which RM24.6bil ahd been issued. For the same period, the size of outstanding bonds stood at RM336bil while the size of outstanding sukuk was RM194bil. Hence, the percentage of outstanding sukuk to total outstanding bonds was 58% in the first half.

On the global front, he said CIMB had done about US$5bil issuance, commanding 19% of the world market share, hence placing it in the number one spot.

On whether Malaysia should offer high bond yields, he said at the moment Malaysia's debt papers were essentially tightly priced because of the high quality issues, noting that the prospect of having high bond yields would build a more attractive overall capital market globally.

In terms of acceptance of ringgit or sukuk by foreign investors, he said the acceptance had grown compared with 10 or 15 years ago and would grow further over time.

On the challenges facing the global sukuk industry, he said the main contention was whether or not an issuer or an investor could easily undertake a sukuk transaction.

On foreign fund inflows, Kumpulan Sentiasa Cemerlang Sdn Bhd senior fund manager Yeoh Keat Seng said Malaysia urgently needed to further boost its competitiveness to attract more foreign funds, otherwise its share of regional inflows would likely drop.

“Currently, Malaysia is behind Singapore, and Indonesia is very close behind us, and I will not be surprised if Indonesia surpasses us in terms of attracting foreign funds in the coming years,” he noted.

Yeoh said the Government initiative through the Economic Transformation Programme must be applauded and regarded as the right move, at the right time to transform the economic approach, adding that Bursa Malaysia must continue to remain relevant to issuers and international investors.

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