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Record sukuk issuance forecast

THE global sukuk issuance this year is expected to surpass the record set in 2007 as Malaysia continues to offer the ability to arrange Islamic bonds in different currencies.

Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz said a total of US$35 billion (RM106.4 billion) of sukuk were issued globally last year, of which two-fifths or US$13.8 billion (RM41.95 billion), originated from Malaysia.

“From the approvals that we have given and the Securities Commission has given, we believe that the sukuk bond issuances will surpass the 2007 level,” she said after the launch of Bloomberg’s Islamic financial service and Malaysian ringgit sukuk index in Kuala Lumpur yesterday.

Official statistics show that up to February 16, the outstanding government sukuk amounted to RM45 billion, while the same amount will mature this year.

Malaysia’s share of the global sukuk market is 62 per cent.

Earlier in her keynote address, Zeti said the global sukuk issuance last year surpassed that in 2009 by over 20 per cent, reflecting investors’ and issuers’ renewed confidence. Four foreign currency sukuks, amounting to about US$3 billlion (RM9.12 billion), were issued in Malaysia last year.

“This trend will benefit from the Bloomberg AIBIM Bursa Malaysia Sovereign Syariah Index (BMSSI) developed by the Association of Islamic Banking Institutions Malaysia (AIBIM), Bursa Malaysia and Bloomberg,” she said, adding that the launch of the ringgit sukuk index would further strengthen Malaysia’s position as the world’s leading sukuk market.

BMSSI measures the performance of the ringgit-denominated syariah-compliant government securities. A ringgit corporate sukuk index will follow soon.

Describing this year as an exciting period for the Islamic finance industry, Zeti said Malaysia will start cross-border trading in sukuk in the second half of the year when Malaysian Electronic Clearing Corporation (MyClear) completes its cross-border financial transaction initiative.

For a start, MyClear, a wholly-owned unit of BNM, will link with central securities depositories such as Euroclear and the Central Moneymarkets Unit at the Hong Kong Monetary Authority. Other central securities depositories will join later.

“MyClear is thus set to be one of the key multilateral settlement platforms that will facilitate sukuk trading transactions,” she said.

She also said the International Islamic Liquidity Management Corp (IILM) will roll out liquidity instruments later this year.

IILM, which started operations on February 1 this year, will issue short-term multi-currency bonds to facilitate cross-border liquidity management between financial centres.

Those present at the launching ceremony included Bloomberg LP president Daniel L. Doctoroff and AIBIM president Mohd Redza Shah Abdul Wahid.

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