Malaysia’s sukuk market to remain bullish this year

KUALA LUMPUR: Malaysia’s sukuk market is expected to remain bullish this year despite the volatility in global markets, especially in the US, says CIMB-Principal Islamic Asset Management chief executive officer, Ramlie Kamsari.

He said Malaysia’s sukuk market will see healthy growth like last year given the strong fundamentals, good infrastructure, regulatory framework as well as the syariah system.

“They (investors) see Malaysia as a good market to tap for both conventional and Muslim investors.

“In fact, the large sukuk issuances recently were due to the huge appetite from conventional investors,” he told reporters after a media briefing on the ‘Global Fixed Income Market and its Potential Effects on Sukuk’ here yesterday.

Ramlie said the local sukuk market was likely to continue to see good interest for the Gulf Cooperation Council issuances, particularly the United Arab Emirates’.

There could also be new issuances from the frontier markets, or the non-traditional ones, including from Europe, he said.

He expected Malaysia to continue to be the world’s largest sukuk market with 69 per cent market share.

Meanwhile, chief investment officer, Michael Zorich, said the global sukuk market moved at a moderate pace as investors were cautious due to the volatility in the fixed income market in the US.

He, however, said the market will catch up towards the year-end and be equalled last year’s RM46.5 billion in value.

“The anticipation of an increase in the US rate will push them (issuers) to wait for the price to be stabilised.

“But, if they don’t issue now, the rates may continue to go up and it can get more expensive to issue the sukuk and bond as well.

So they need to balance their decision,” he said.

Currently, the benchmark 10-year US Treasury rate stood at 2.4 per cent, rising from 1.6 per cent in the early May, and is expected to climb up to 2.5 per cent by year-end.

Ramlie said the volatility in the US fixed income market will not significantly affect the sukuk market as the Islamic bond has its own asset class.

“When investors seek diversification play, they will look at sukuk as another asset class. So, there will be continued demand for investment into sukuk,” he said.

(Borneo Post Online / 22 June 2013)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com