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Friday, 6 June 2014

Malaysia’s sukuk market to grow 10 per cent in 2014-2015

KUALA LUMPUR: Sukuk issuance in the Malaysian market is expected to see steady growth of around 10 per cent during 2014 to 2015, says Moody’s Investors Service.

Its Asean corporate finance group managing director, Philipp Lotter, said this was in line with Moody’s positive view on the long-term growth trends in the global sukuk market.

“Given the deep local capital markets and strong support from the government, Malaysia will remain the world’s largest sukuk market for the foreseeable future although regional and global competition will develop over the next two to three years,” Lotter said in a statement yesterday.

He said some two-thirds of the approximately US$290 billion outstanding sukuk was issued in Malaysia.

“We expect the remaining one-third to stay fragmented because a growing number of new and emerging sukuk issuance markets, such as Indonesia, Singapore and Hong Kong are tapping into this fast-growing asset class although Saudi Arabia is showing strong domestic potential,” he added.

Moody’s analysis is contained in its just-released report titled “Malaysian Sukuk Market: Issuance To Show Steady Growth To 2015.” The report said growth in Malaysia’s sukuk market would be driven by few key factors such as sovereign and related issuers.

Private sector corporates seeking to raise the necessary funding to execute the government’s investment blueprint aimed at attracting US$444 billion in investments from 2010-2020 under the country’s economic transformation programme would also drive sukuk issuance.

The report pointed out that international issuances in Malaysia accounted for less than 10 per cent of the US$178 billion in total outstanding sukuk.

Moody’s expected issuance volume to remain dominated by local-currency transactions in the near future with the increase in international foreign-currency sukuk issuances in the Gulf region.

However, it said the larger more creditworthy issuers in Malaysia would look to diversify their funding and tap the global markets in 2014-2015.

The report further indicated that over the last decade, the increasing acceptance and popularity of sukuk among domestic investors in Malaysia had resulted in a substantial growth in issuance volume.

Annual issuance of Malaysian sukuk grew at a compounded annual growth rate of 22 per cent to US$33 billion in 2013 from US$3 billion in 2001

(Borneo Post Online / 06 June 2014)
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