RAM: Sukuk mart set for growth

By Alfean Hardy
RAM Rating Services Bhd is forecasting double digit growth in sukuk issuance within the next nine months, driven mostly by infrastructure projects and a local banking sector that is expected to survive relatively unscathed from the global financial crisis, its managing director/chief executive officer Wong Fook-Wah said.
At the launch of Malaysia's first market-driven handbook, The Malaysian Sukuk Market Handbook, in Kuala Lumpur yesterday, RAM chairman Tan Sri Siti Norma Yaakob acknowledged that sukuk growth had slowed down.
"Growth has been slowed in the past six months by the unfavourable credit market conditions. Still, once market conditions return to normal, we expect it to be business as usual, with sukuk issuance to resume its impressive growth, fuelled by huge investment and financing needs, notably in countries in the Gulf and Asia," she added.
As of end-2007, total sukuk originated from Malaysia hit the RM213 billion mark or 68.9% of the global outstanding sukuk. Of the RM27 billion in conventional and Islamic bonds issued by third quarter of this year, sukuks accounted for about RM8 billion of that figure, according to RAM data.
Speaking to reporters following the launch of the handbook, Wong said demand in the local market and emerging markets like the Gulf states and Korea are expected to spur the Malaysian sukuk market within the next six months to nine months when market conditions and the international situation returns to normal.
"We expect double digit growth again for the sukuk market then. It's very clear cut that Malaysia and the other Asian countries will suffer less from the current crisis that's affecting the US and Europe. We believe the Gulf states and Asia will come back after this blip and will continue to grow because of the greater infrastructure needs and the growing affluence (of its people)," he added.
Wong said this year, the Malaysian sukuk market will be affected by the current global situation. "We are not expecting sukuk issuance or for that matter the total amount of financing this year to be very large, about RM30 billion all-in, both conventional and Islamic," he said. (The Malaysian Reserve, Nov 18, 2008. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays)