Brighter outlook for sukuk market in the second half

The growth prospect of the sukuk market in Malaysia is expected to be better in the second half of this year compared to the first six months, said chief executive officer of CIMB Islamic Bank Bhd Badlisyah Abdul Ghani.

"In the first half, investors and issuers wanted to be sure of the direction of the market in general before making decisions. I think sanity as well as better colour on the market can be seen now. I see better prospect in the second half compared to the first half," he told The Malaysian Reserve in a recent interview.

Badlisyah said investors and issuers will tap the sukuk market at the right time in the second half of the year. "They (investors and issuers) are fairly cautious but it does not mean that they will not go into the market in the second half. It is always natural for them to take time to understand and appreciate the condition of the market before tapping it," he said.

According to reports, sales of ringgit sukuk have fallen by more than 40% in the past months of this year compared to that of last year due to the smaller number of infrastructure projects that were implemented in Malaysia during the period. "If you compare year-onyear, the first part of the year is weaker.

Although our sukuk market is fairly independent, investors and issuers will have to look at market development as a whole, not just in Malaysia but also what is happening in Europe and Dubai to decide on the appropriate course of action," he said.

Generally, Badlisyah is bullish on the growth prospects of the local sukuk market as the players and issuers are seen to be equally active in the market to meet the demand of the wide sukuk investor base. "We should have about the same level of sukuk issuance as we had last year, if not better," he said.

Badlisyah expects the sales of global Islamic bonds to reach US$25 bi l l ion (RM80.88 billion) this year, up 24% from last year. He said Malaysia will continue to dominate the global market accounting for 60% of the total. Badlisyah who has been at the helm of CIMB Islamic since 2002 said the global Islamic franchise of the CIMB Group hopes to continue as one of the biggest lead managers for sukuk globally as well as in Malaysia.

"CIMB Islamic has been at the top of the global and local sukuk lead manager table since the birth of the Isl ami c c api t a l ma rk e t industry. We want to remain that way and will continue to go the extra mile in bringing quality transactions to the market to achieve it. We have done 37 issuances so far this year. The number looks good and we hope to do more before year-end," he said.

(This story, written by By Dalila Abu Bakar, appeared in The Malaysian Reserve on June 28, 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)