At the third Global Islamic Finance Forum held from September 18 to 20 in Kuala Lumpur, Malaysia, news service and business data provider Bloomberg announced the launch of a new Malaysian Ringgit (MYR) corporate sukuk index, developed with the Association of Islamic Banking Institutions Malaysia (AIBIM) and Bursa Malaysia.
The Bloomberg AIBIM Bursa Malaysia Corporate Sukuk Index will serve as a benchmark for investors of ringgit-denominated Islamic bonds in Malaysia, the world’s biggest sukuk market.
Global demand for corporate and sovereign sukuk has grown over the last decade and in Malaysia, as low borrowing costs continue to drive issuance. Malaysia is having a record year for sales of corporate sukuk, with potentially about 20 billion ringgit of Shariah-compliant debt in the pipeline, according to data compiled by Bloomberg.
The new corporate sukuk index will track and measure the performance of the most liquid and credit-worthy Islamic corporate bonds in Malaysia. Bloomberg will calculate the Index daily, with rates and prices contributed by member banks of AIBIM.
“Bloomberg has been investing in Islamic finance globally and this announcement reaffirms our commitment to Malaysia’s development as a global Islamic financial centre,” said Kamel Hajri, Bloomberg’s Business Manager for Islamic Finance.
“This collaboration means we now have a complete portfolio of Islamic finance indices and tools for Malaysia. We look forward to expanding our joint efforts with key industry players to further enhance market transparency and liquidity, with the goal of fulfilling investor demand for more robust Shariah-compliant solutions,” he added.
Dato’ Mohd Redza Shah Abdul Wahid, President of AIBIM, said, “With the diversification of the Islamic finance market, there is a growing need for access to accurate, timely and comprehensive data. Strategic collaboration to develop localized financial products will help stimulate the long-term growth, competitiveness and sustainability of Islamic finance services.”
“As a top global sukuk underwriter, we see domestic and foreign issuers actively tapping the Malaysian sukuk market,” said Dato’ Mohamad Zabidi Ahmad, CIMB Malaysia’s Head of Islamic Treasury.
“By providing accurate pricing and benchmarking, this index will improve portfolio management and contribute to a more robust bond market,” he added.
Deputy Governor Muhammad Ibrahim said, “Malaysia continues to develop and strengthen Islamic finance with increasingly sophisticated products and supportive infrastructure. The launch of the Bloomberg AIBIM Bursa Malaysia Corporate Sukuk Index is timely as it will contribute to better price transparency that enables investors to make informed investment decisions.”
This is the third sukuk index Bloomberg, in collaboration with Bank Negara, AIBIM and Bursa Malaysia, has developed for the Malaysian market. In 2011, Bloomberg launched the AIBIM Bursa Malaysia Sovereign Index (BMSSITR) and the Malaysia Sukuk Ex-MYR Index (BMSSUTR), as part of its Islamic Finance Platform (ISLM), a broad set of data, analytics and news dedicated to Shariah-compliant products and services.
Murabahah Agreement signed
Also at the forum, AIBIM announced the signing of the Master Collateralised Murabahah Agreement between Bank Negara Malaysia and 11 Islamic Financial Institutions. The agreement is seen as an alternative solution in addressing the urgent demand of Islamic banks in managing their liquidity.
The signing which enables the 11 Islamic banks to obtain additional funds from Bank Negara Malaysia via Commodity Murabahah, would benefit the industry in the following manner: it diversifies the existing liquidity management tools and further promotes greater liquidity in the Islamic financial market, it allows Islamic financial institutions to obtain funds from the Central bank by pledging high investment grade sukuk as collateral, and it enables Islamic banks to tap on liquidity by utilising their holdings of tradable Sukuks and other acceptable Islamic securities as pledge for their liquidity requirements,