CAPITAL MARKETS - RAM Islamic bullish on Malaysia sukuk market

THE country's sukuk market is likely to be favourable this year with RM261.1 billion sukuk outstanding in the first half, up from RM248.7 billion as end of 2009.


From January till May this year, total new corporate sukuk approved by the Securities Commission stood at RM970 million.

Local rating agency RAM Ratings sees promising sukuk market this year, with government-related infrastructure projects and banks' capital-raising exercises to remain the bulk of the domestic debt capital market's activity.

"We see interest from global financial players to issue ringgit-denominated sukuk as well as a few new sukuk programmes by Malaysian players in the pipeline, that may be issued in the second half of 2010," RAM Islamic ratings head Zakariya Othman told Business Times in an interview in Kuala Lumpur.

In June this year, the National Bank of Abu Dhabi (NBAD) issued its first sukuk of RM500 million. It was issued under its ringgit medium-term note programme. The offering was oversubscribed nearly four times.

Zakariya said the outlook remains positive worldwide with several sovereign issues in the pipeline, while the corporate sukuk market is returning.

He said there are interest from new players to develop their sukuk markets such as Turkey, South Korea, Japan and Australia.

"The overwhelming demand for the US$1.25 billion (RM3.88 billion) sovereign sukuk issued by the Malaysian government under the Ijarah contract shows investors' confidence in the local sukuk market," he said.

The sovereign sukuk - the second global sukuk issued by the government - has wide subscription investors' base, covering the Gulf Cooperation Council countries (26 per cent), Europe (20 per cent), the US (15 per cent), Malaysia and other investors (18 per cent), and the rest of Asia (21 per cent).

Zakariya said to improve sukuk's performance in the country, more expertise are needed in the sukuk market.

The experts, he said, should be developed through education and training in a combination of syariah and finance matters.

"Syariah advisers' roles and responsibilities need to be strengthened, while their knowledge on financial matters as well as understanding in more innovative structures need to be enhanced," he added.

He believes that more harmonisation of sukuk structures, which vary considerably among different jurisdictions, is also needed.

"However, Malaysia is still at the forefront to take advantage of the development due to its competitiveness as the global leader in sukuk issuance," he noted.

Source : http://www.btimes.com.my/Current_News/BTIMES/articles/sukuk19-2/Article/ - Sept 21, 2010