The global sukuk market is expected to reach a record US$125 billion (RM382.81 billion) in 2012 driven by positive prospects, with Malaysia continuing to be in the forefront of the market, said an Islamic banker.
Hong Leong Islamic Bank and Hong Leong MSIG Takaful Bhd syariah adviser Prof Dr Malik Muhammad M. al Awan said global sukuk issuance in the first quarter of 2012 hit US$43.5 billion, up 55% from the corresponding period last year.
Malaysia maintained pole position with 71% of sukuk issued, followed by Saudi Arabia with 15%.
He said prospects for the sukuk market for the rest of the year are bright with more issuance in the pipeline and the entry of new emerging markets.
The improvement in market conditions, and gradual recovery of the global economy and investor sentiment will also drive the demand for sukuk deals.
"If the trend continues, we are looking at about US$125 billion worth of sukuk offering globally in 2012, which is a record," Malik Muhammad told reporters at the two-day Islamic Bonds (Sukuk) Outlook Conference yesterday.
The conference, themed "Reviving markets and seizing opportunities for continuous growth" is organised by the Asian Strategy & Leadership Institute (ASLI).
In 2008 and 2009, Malik Muhammad said, the sukuk market faced a slowdown due to the global economic downturn.
He said Malaysia is expected to retain its leadership position in the sukuk market this year despite stiff competition from Indonesia and the Gulf Cooperation Council (GCC) countries due to its strong legal and regulatory framework.
"Most issuers have options to either go for conventional or Islamic instruments such as sukuk. Every issuer will look into cost structure and tax situation before they decide what option to use. The relative cost of sukuk financing or borrowing on a long-term basis through sukuk is cheaper," he said.
Meanwhile, an analyst said: "What makes Malaysia a vibrant sukuk market is the holistic and continuously improved regulatory framework. These have helped to boost the development of the sukuk market in the country."
He said sukuk has become a preferred instrument in the Malaysian bond market with RM75.6 billion worth of sukuk issued in 2011.