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Tuesday, 12 April 2011

Malaysia Market Able to Absorb USD16 b. Railway Sukuk

Chief executive officer of CIMB Islamic Bank Bhd. comments on the government’s plan to raise funds for a 48 billion ringgit ($16 billion) railway project in Kuala Lumpur. He made the remarks in an interview with Bloomberg TV.

The government may sell ringgit-denominated Islamic bonds to help finance construction of a mass railway system in Kuala Lumpur, Prime Minister Najib Razak said on March 29. The project will be the country’s single biggest infrastructure development, said Najib. 

On sukuk demand:
“All huge infrastructure projects in Malaysia have always been funded by Islamic bonds, because Islamic bonds would attract a wider investor base and therefore increase the opportunity for any issuance to raise a larger pool of funding.”

On where the demand comes from:
“From the typical investor base that comprises of takaful companies, insurance companies, banks, whether it’s Islamic banks or conventional banks, and you have corporates with large treasury operations and the asset management companies, and foreign investors that look at the ringgit market as part of their portfolio management. Islamic papers have proven to be able to tackle the long-term nature of infrastructure projects.
“There’s always a concern whether or not the market can absorb all the issuance but the market is mature enough.”

On sukuk sales from the Gulf Cooperation Council countries:
“This market in the Far East can make up for any shortfall of issuance in the GCC. There are GCC issuances that will also be tapping the Malaysian market. They may not be able to tap the GCC market because of the unrest, but quality issuances from the GCC are still looking at tapping the Malaysian market because it is more established and mature market. Quite a number of them are already slated to come to the market anytime this year. Notwithstanding the unrest in GCC, sukuk activities continue.”

(Bloomberg/1 Apr 2011)

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