Report: Malaysia retains lead in Islamic finance

PETALING JAYA: Malaysia continues to lead in Islamic finance as
Singapore strives to make inroads into the sector, according to a
report in the Singapore Business Times.
HSBC Amanah (M) Bhd chief executive officer and Global Markets Amanah managing director Rafe Haneef was quoted by the daily as saying Malaysia had a large volume of Islamic investors looking for syariah-compliant investments like sukuk compared with the Singapore market.
“Along with Islamic investors, Malaysia has a large number of Muslim-owned companies, most of which are looking for syariah-compliant
financing and sukuk issuance. Again, there is not a high demand for
such financing in the Singapore corporate environment,” Rafe said.
Malaysia accounts for 60% of global sukuk deals.
Rafe
said the global sukuk market was expected to expand to US$44bil
(RM137bil) this year. For the first half of 2012, the global sukuk
market was worth US$20.5bil (RM64bil), up from US$15bil (RM46.7bil) a
year earlier.
According to a statement from the Securities
Commission (SC), fund-raising activities in the second quarter
continued to be robust with the regulator receiving a total 56
applications for equity-related proposals and issuances of private debt
securities (PDS) – three times the applications received in the first
quarter.
The SC said a total 42, or 75%, were PDS applications, and the balance were for equity-related proposals.
The
regulator said the debt market in Malaysia remained active with the
number of approved PDS applications in the second quarter increasing to
24 compared with 16 in the first quarter. The total amount of funds
approved to be raised from ringgit-denominated PDS issues also
increased by 4.9% to RM23.01bil versus RM21.94bil in the first quarter.
The
SC said that at end-June, the total amount of bonds outstanding stood
at RM941bil, reflecting the continued growth of the Malaysian bond
market. The figure included US$165.2bil (RM515bil) in sukuk
outstanding, which represents two-thirds of the total sukuk outstanding
globally of US$243.4bil (RM758.2bil).
In 2011, corporate bond
issuances in the Malaysian capital market totalled RM70bil. In the
first half of 2012, total corporate bond issuances reached RM66bil,
including PLUS Bhd’s RM30bil sukuk earlier this year – the single largest corporate sukuk in the world.
Just last week, Celcom Axiata Bhd
announced it had successfully priced its sukuk issuance of RM5bil in
nominal value, of which RM3bil received a final book of RM10bil via
bookbuilding process. Celcom said the RM5bil sukuk was the largest
rated sukuk murabahah issuance based on a tawarruq arrangement in the Malaysian debt capital market to date.
The Singapore Business Times
also quoted bankers as saying Singapore was hobbled by a lack of
domestic market for Islamic finance products, while Middle East
investors were still US dollar-based and conservative.
The situation appeared to be improving when in 2010 Khazanah sold S$1.5bil sukuk in Singapore, and Sabana, the world’s largest syariah-compliant real estate investment trust (Reit), raised S$664mil through its initial public offering.
Since
then, the Islamic finance landscape there has been rather barren. It
said Singapore appeared to be missing out on one of the fastest-growing
financial markets, with Islamic finance growing at an estimated 15% to
20% a year.
Islamic banking assets with commercial banks
globally will hit US$1.1 trillion (RM3.43 trillion) in 2012, up a third
from US$826bil (RM2.6 trillion) in 2010, according to figures from the
2011 Ernst & Young World Islamic Banking Competitiveness Report.
The
business daily said another problem for Singapore was that conservative
Middle Eastern investors tended to invest only in familiar companies
and preferred to make those investments in US dollars.
Maybank
Singapore’s head of Islamic banking Mohd Ismail Hussein was quoted as
saying the expected demand from Middle East investors did not
materialise because of economic and liquidity issues at home.