KUALA LUMPUR: The United Kingdom (UK) wants to deepen its trade ties with Malaysia, particularly in the Islamic capital market and in return, Malaysia can tap into a bigger pool of international investors when it uses London as a platform to issue debts.
Throwing in the idea, Lord Mayor of the City of London, Alderman Peter Estlin said the UK recognised Malaysia’s role and knowledge in an Islamic debt instrument, as well as the largest sukuk market with 50% of the global share and the innovator of green sukuk.
However, the issuance was largely domestic issuance and not international, he noted.
“As for the UK, the area (of Islamic debt market) hasn’t really developed in the same way as other segments of the market,” he told Bernama during his two-day official visit to Malaysia recently.
“The situation was a golden opportunity for both the UK and Malaysia, because for us, there is a desire to see greater retail investment and we are ready to work closely with Malaysia and support Malaysia in the related area,” he added.
London Stock Exchange Group plc (LSEG) was dubbed as home to the first sovereign sukuk issued outside the Islamic world in June 2014 when the UK government listed a £200mil sukuk and to date, there were 74 sukuk listings on London’s markets with about US$5bil had been raised.
Estlin, who also serves as the global ambassador for UK-based financial and professional services industry from Nov 9, 2018, for a one-year term, said, however, if Malaysia was keen to attract global investors, it must provide a clearer investment policy.
He pointed out that among the first things to do was to ensure documentation was based on an international standard so that investors feel that there was genuine risk protection in the case of construction risk to the extent that it was supported by an appropriate level of insurance and risk management.
These were the things that Malaysia could do and at the same time, it was important for the UK to understand Malaysia’s strategy and focus on where it could help, Estlin said.
“(Therefore), the question for Malaysia is, are you interested in attracting further international investments?
“If so, there’s a way that we can collaborate and encourage Malaysian issuers to leverage on the LSEG as a way to get greater international capital,” he added.
The UK, he said, was particularly interested in sustainable financing for infrastructure projects that Malaysia seemed to focus on.
There are three related Islamic markets on the LSEG namely, the FTSE Shariah Global Equity Series, Shariah Fixed Income Indexes and Saudi Equity Indexes, and currently, there are 28 active sukuk with a total outstanding amount US$27 bil.
According to a Bank Negara report, as at the end of January 2019, Malaysia’s Islamic financing comprised 32% of the overall system’s loans while Islamic banking assets stood at RM874bil or 30.4 % of the total banking assets as at end-September last year, with an annual growth of 10% over the past three decades.
Whereas in the UK, the UK-based institutions offering Islamic financial services have approximately US$4.5bil of assets.
According to Ram Ratings, Malaysia has maintained its leadership as a global sukuk issuer with its issuance accounting for US$13.9bil of the sukuk issued globally.
The research house revealed that the sukuk issuance reached US$39.5bil at end-March with Malaysia’s issuance portion stood at 35.1% followed by Indonesia and Saudi Arabia with respective shares of 17.0% or US$6.7bil and 15.3 % or US$6.1 bil.— Bernama