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Wednesday September 19, 2012

Strong demand for Islamic financing likely to push corporate sukuk issuance to RM90bil this year

KUALA LUMPUR: Malaysia's corporate sukuk issuance is expected to grow by 15% to 20% to RM90bil this year, supported by strong demand for sukuk on the back of uncertainties in the market.

Association of Islamic Banking Institutions Malaysia (Aibim) president Datuk Mohd Redza Shah Abdul Wahid (pic) said as of June 2012, Malaysia's corporate sukuk stood at RM64bil.

“We expect this year's growth to be faster than that of last year, in tandem with Bursa Malaysia's strong performance so far as we had the second and third largest initial public offerings (IPOs) this year,” he told reporters after the launch of the Bloomberg Aibim Bursa Corporate Sukuk Index here yesterday.

Association of Islamic Banking Institutions
Malaysia (Aibim) president Datuk Mohd Redza
Shah Abdul Wahid Association of Islamic Banking Institutions Malaysia (Aibim) president Datuk Mohd Redza Shah Abdul Wahid

He said Malaysia so far had been proactive in terms of being very serious and aggressive in pushing the initiative to develop the Islamic capital market.

The seriousness of the regulators and market participants had actually contributed to the growth of sukuk in the Malaysian market, he added.

Redza said Malaysia continued to be the world's biggest market for sukuk with 65% market share.

According to a report from Standard & Poor's Rating Service (S&P), Malaysia is now the world's leader in sukuk issuance. “Political will, recognition of beneficial ownership, tax incentives and rising investors base have all supported the country's continued growth trajectory,” S&P credit analyst Allan Redimerio said in a report earlier this month.

S&P further said Abu Dhabi National Energy and Bahrain-based Gulf Investment Group were the first to issue sukuk in ringgit. “The ringgit is attractive because of Malaysia's established regulatory framework for Islamic finance and the wide pool of investor action in this market.”

At the event yesterday, Bloomberg launched a ringgit corporate sukuk index, developed with the Aibim and Bursa Malaysia.

The Bloomberg Aibim Bursa Malaysia Corporate Index would serve as a benchmark for investors of ringgit-denominated Islamic bonds in Malaysia.

The index will track and measure the performance of the most liquid and credit-worthy Islamic corporate bonds in Malaysia.

CIMB Malaysia head of Islamic treasury Datuk Mohamad Zabidi Ahmad said that by providing accurate pricing and benchmarking, this index would improve portfolio management and contribute to a more robust bond market.

The index was a step in the right direction towards achieving Malaysia's goal of expanding the global Islamic capital market and making Malaysia the hub for Islamic market globally, he added.

Last year, Bloomberg launched the Aibim Bursa Malaysia Sovereign Index and the Malaysia Sukuk Ex-MYR Index as part of its Islamic Finance Platform, a broad set of data, analytics and news dedicated to syariah-compliant products and services. - Bernama

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