Sukuk issuance set for a new record in 2012

26/04/2012 21:57 AST

The global Sukuk market could reach $125 billion this year. Malaysia will remain the dominant market despite a strong rise in issue in GCC countries.

Professor Dr Malik Muhammad M. al Awan, Sharia Adviser, Hong Leong Islamic Bank and Hong Leong MSIG Takaful Bhd, is quoted by Kuala Lumpur-based Business Times as saying total global Sukuk issuance in Q1 2012 reached $43 billion, of which some $30 billion was issued in Malaysia – the country accounts for some 73 per cent of the total Sukuk issued globally.

"Besides, sukuk financing or borrowing on a long-term basis is relatively cheaper in Malaysia than conventional, so there's an attraction for issuers to use Sukuk," he told reporters at the Islamic Bonds (Sukuk) Outlook Conference organised by the Asian Strategy & Leadership Institute.

He went on to say that Sukuk issuances in the GCC are expected to continue to grow markedly, noting that a typical Saudi Arabian Sukuk could be as high as $5-6 billion, adding this is a welcome development for the global market. "The capacity of Saudi Arabia is 10 times of Malaysia to create additional fixed income securities and it's just that up to now the Saudis have not taken the Sukuk route as Malaysia did over the last 10-15 years.

"Now as particular Sukuk structure is becoming popular among Saudi issuers and with overall higher capital capacity to create Sukuk, they will take a larger market share going forward, which does not mean at the absolute level Malaysia's Sukuk issuance is declining. It's just that Saudi Arabia's relative Sukuk size would be much bigger.”

CPI Financial