KUALA LUMPUR (April 27, 2012): The global Islamic bond market saw a 68% increase in value of new issuance to US$92 billion last year, with Malaysia at its epicentre. The domestic market accounted for 73% of the total new issuance and the domicile for 68% of the estimated US$210 billion worth of outstanding sukuk worldwide.
Under the Second Capital Market Masterplan (CMP2), the sukuk segment is expected to account for RM1.3 trillion or 46% of the total size of the domestic Islamic capital market. This translates to an average annualised growth forecast of 16.3% over the next 10 years.
While long-term growth in market size is intact, supported by the need to fund billions worth of planned infrastructure projects, one key challenge that is hampering the development of the global sukuk market is the lack of trading liquidity.
"There is a need to develop a more robust secondary market for sukuk that would enhance its appeal especially to active investors, such as fund managers,'' Securities Commission deputy chief executive Datuk Nik Ramlah Mahmood said yesterday.
This has led to the setting up of the International Islamic Liquidity Management Corp (IILM).
The IILM was established to facilitate cross-border liquidity management among institutions offering Islamic financial services by making available a variety of syariah-compliant instruments, including sukuk, on commercial terms, to suit the varying liquidity needs of these institutions.
It also seeks to foster regional and international cooperation to build a robust liquidity management infrastructure at national, regional and international levels.
But while the infrastructure is there, differing views among syariah scholars pose another challenge.
To overcome this challenge, sukuk issuers that seek to maximise their investor base are now opting for structures that are more broadly accepted by most jurisdictions.
"At the same time, increased engagement and exchange of views among syariah scholars and advisers should contribute to improved appreciation of these differences,'' Nik Ramlah said in her keynote address at a conference on the outlook for sukuk organised by the Asian Strategy & Leadership Institute.