The issuance of global sukuk, bond-like instruments that are compliant with Islamic Shariah law, is expected to break previous volume records in 2012, but the Middle East may not be the centre stage for the boom of Islamic financial products.
Recent initiatives by banks, service providers and regulators suggest that the Malaysian financial market is in the best position to take advantage of the ‘sukuk fever’.
Data published by the Zawya Sukuk Monitor show that the largest amount of issuance (70%) comes from South-East Asia, and Malaysia in particular.
The recent launch by Bloomberg of a Malaysian ringgit corporate sukuk index, developed with the Association of Islamic Banking Institutions Malaysia and Bursa Malaysia, confirmed the trend.
The index will serve as a benchmark for investors of ringgit-denominated Islamic bonds in Malaysia.
“Global demand for corporate and sovereign sukuk has grown over the last decade and in Malaysia, as low borrowing costs continue to drive issuance,” Bloomberg said. “Malaysia is having a record year for sales of corporate sukuk, with potentially about MYR20bn of Shariah-compliant debt in the pipeline.
The new corporate sukuk index will track and measure the performance of the most liquid and credit-worthy Islamic corporate bonds in Malaysia. Bloomberg will calculate the index daily, with rates and prices contributed by AIBIM member banks.
AIBIM president Dato’ Mohd Redza Shah Abdul Wahid added that, with the diversification of the Islamic finance market, there is a growing need for access to accurate, timely and comprehensive data.
“Strategic collaboration to develop localised financial products will help stimulate the long-term growth, competitiveness and sustainability of Islamic finance services,” he said.
Meanwhile, the Islamic Financial Services Board (IFSB) and the International Organisation of Securities Commissions (IOSCO) warned the growing recognition of the increasing significance of the Islamic capital market has triggered the need for stronger oversight, greater transparency and more robust disclosure requirements.