A series of new sukuk issues in East Asia aims to capitalise on the strong global demand for Islamic assets, as the region vies with rival global finance centres.
Hong Kong on Monday issued its second sovereign sukuk. The AAA-rated sukuk has a par value of US$1 billion and a tenor of five years.
Two-thirds of its value are underpinned by sale-and-repurchase transactions on commodities markets, while the remaining third of the value is underpinned by government property.
The National Bank of Abu Dhabi was one of the main underwriters.
The sukuk was extensively marketed to Middle East investors, according to Zawya, a business news and research website. There was a road show to Saudi Arabia, the UAE helped to increase the number of subscribers in the region, and 42 per cent of the sukuk was allocated to investors in the Middle East.
Indonesia offered two new sukuk issues last month – its $2bn sovereign sukuk was more than three times oversubscribed, and the national airline Garuda Indonesia issued a $500 million sukuk.
International analysts have repeatedly pointed to the need for sovereign sukuk issues to help develop markets in Islamic assets. Investors, bankers and analysts say the lack of highly-rated, liquid and high-value sukuk issues hinders the industry’s development.
The Asian Infrastructure Investment Bank (AIIB) said last month that it was in talks with the Islamic Development Bank about using sukuk to help fund regional infrastructure.
The UAE is a founding member of the AIIB, a new China-led institution touted as a competitor to the IMF.
A recent G20 summit in Turkey ended with world leaders calling for the greater use of sukuk in infrastructure investment.
Over the next 25 years, Asia will need between $400bn and $700bn in new infrastructure investment, according to the Asian Development Bank.
Malaysia remains the world’s largest sukuk market, with $40bn of sukuk issued last year, according to credit ratings agency Moody’s.
But rapid rates of economic growth mean that there is plenty of room for Dubai, London and Hong Kong to compete with Kuala Lumpur.
Professional services consultancy Ernst and Young predicts that global demand for sukuk will triple between now and 2017. It expects that about $900bn in Islamic assets would be traded in 2017, up from $300bn this year.
abouyamourn@thenational.ae
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