Islamic bonds accounted for nearly half of total issuances in Malaysia in the first half of the year, compared with 35 percent over the same period last year, data from the Securities Commission (SC) showed, reflecting the growing importance of sukuk in the country's capital market.
Sovereign and corporate sukuk in the six months to June increased to 420.8 billion ringgit ($136.96 billion) from 315.6 billion ringgit ($102.72 billion) over the same period last year.
The pace of growth suggests that the country is on course to reach its target of one trillion ringgit of sukuk bond issuances by 2020 as part of its capital markets plan for the 2010-2020 period.
"Malaysia is now the world leader in sukuk issuance. Political will, recognition of beneficial ownership, tax incentives, and a rising investor base have all supported the country's continued growth trajectory," ratings services agency Standard & Poor said in a report this week.
The agency said the growing popularity of sukuk was due to the decreasing number of conventional loans and their shortened tenures. Companies are also considering other options for financing, and Islamic instruments are expected to become a key funding source for the Gulf Cooperation Council region and Asia.
S&P said the G CC issued $19 billion in sukuk as of July, the same amount for the whole of 2011. Asia issued $57.9 billion in the same period, compared to $64.9 billion last year.
Malaysia accounted for two-thirds or $165.2 billion of global outstanding sukuk as at June. These included PLUS Berhad's 30 billion ringgit sukuk and issuances by government-linked firms, Khazanah Nasional Bhd and Cagamas Bhd.
(Reuter / 13 Sep 2012)
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com