Sukuk finance key for Asia infrastructure
Islamic financial instruments could become a key funding source in Asia and the GCC, international rating agency Standard & Poor’s said in a new report issued September 12 .
Both regions, with established Islamic financial regulatory bodies, are centers of the growing estimated $1 trillion sukuk market and are seeking huge amounts of capital to pay for their soaring needs for new infrastructure, the agency argued.
“The GCC market reached over $19 billion of issuance as at July 2012, about the same as for all of 2011. Of that, infrastructure represented 30 per cent, compared with just 7 per cent in the previous year, said Standard & Poor’s credit analyst Karim Nassif.
“The reasons for the surge are low yields, relatively high liquidity, large capital expenditure needs, and strong investor appetite,” he said.
“Total sukuk issued out of Asia reached $57.9 billion in July 2012, compared with $64.9 billion for all of last year,” Standard & Poor’s credit analyst Allan Redimerio added.
“Malaysia is now the world leader in sukuk issuance. Political will, recognition of beneficial ownership, tax incentives, and a rising investor base have all supported the country’s continued growth trajectory,” Redimerio said.
Tapping the sukuk market could help improve the capital structure and liquidity profiles of GCC and Asian companies, particularly those operating in capital-intensive industries such as infrastructure, the report says. It could provide such companies the longer-term funding they need via a different funding source. This source is becoming more liquid as it reaches across border and becomes more global and grows in scale.
Over the past year, GCC companies have been crossing the figurative border into Asia for infrastructure finance. Abu Dhabi National Energy and Bahrain-based Gulf Investment Corp. were the first to issue sukuk in Malaysian ringgit. The ringgit is attractive because of Malaysia’s established regulatory framework for Islamic finance and the wide pool of investors active in that market, the report says.
[caption id="attachment_4588" align="alignleft" width="300"] GCC countries have started to issue sukuks in Malaysian ringgit[/caption] Islamic financial instruments could become a key funding source in Asia and the GCC, international rating agency Standard & Poor's said in a new report issued September 12 . Both regions, with established Islamic financial regulatory bodies, are centers of the growing estimated $1 trillion sukuk market and are seeking huge amounts of capital to pay for their soaring needs for new infrastructure, the agency argued. "The GCC market reached over $19 billion of issuance as at July 2012, about the same as for all of...
Islamic financial instruments could become a key funding source in Asia and the GCC, international rating agency Standard & Poor’s said in a new report issued September 12 .
Both regions, with established Islamic financial regulatory bodies, are centers of the growing estimated $1 trillion sukuk market and are seeking huge amounts of capital to pay for their soaring needs for new infrastructure, the agency argued.
“The GCC market reached over $19 billion of issuance as at July 2012, about the same as for all of 2011. Of that, infrastructure represented 30 per cent, compared with just 7 per cent in the previous year, said Standard & Poor’s credit analyst Karim Nassif.
“The reasons for the surge are low yields, relatively high liquidity, large capital expenditure needs, and strong investor appetite,” he said.
“Total sukuk issued out of Asia reached $57.9 billion in July 2012, compared with $64.9 billion for all of last year,” Standard & Poor’s credit analyst Allan Redimerio added.
“Malaysia is now the world leader in sukuk issuance. Political will, recognition of beneficial ownership, tax incentives, and a rising investor base have all supported the country’s continued growth trajectory,” Redimerio said.
Tapping the sukuk market could help improve the capital structure and liquidity profiles of GCC and Asian companies, particularly those operating in capital-intensive industries such as infrastructure, the report says. It could provide such companies the longer-term funding they need via a different funding source. This source is becoming more liquid as it reaches across border and becomes more global and grows in scale.
Over the past year, GCC companies have been crossing the figurative border into Asia for infrastructure finance. Abu Dhabi National Energy and Bahrain-based Gulf Investment Corp. were the first to issue sukuk in Malaysian ringgit. The ringgit is attractive because of Malaysia’s established regulatory framework for Islamic finance and the wide pool of investors active in that market, the report says.
