HK on sukuk bandwagon ahead of Silk Road revival

MuslimsinHongKongenteramosqueinKowloon.AstheSARisinastrategicpositiontoaccessChina’slargeMuslimpopulation,itneedsstrongereffortstoharnessinvestordemandandimproveliquidity,expertssays.(Asianewsphoto)

(CHINA DAILY)

HongKong’spossiblethirdIslamicglobalbondinthreeyearsbringsitclosertoIndonesiaandMalaysiaintermsofsovereignsukukpresence,aboosttothemarketthatcoincideswiththenation’sSilkRoadrevival.

Thefinancecenterhasalreadyraised$2billionfromsalesin2014and2015,whichattracted$6.7billionintotalorders,whileIndonesiaplanstotapinvestorsforthesixthyearrunningandMalaysiaisreturningforitsseventhoffering.Whilethecityonlyhas270,000peoplefollowingtheteachingsoftheKoran,it’spositioningitselfasavitalportandfinancinghubforChina’sBeltandRoadInitiativepolicyannouncedbyPresidentXiJinpingin2013.

“TheannouncementisagreatsignofHongKong’scontinuedwishtobeatthecenterofpeople’smindswhenitcomestoIslamicfinancinginAsia,particularlyasmomentumbuildsaround(thenation’s)BeltandRoadInitiative,”saidDavideBarzilai,HongKong-basedheadofIslamicfinanceforAsiaPacificatlawfirmNortonRoseFulbright.“WewillfindthatIslamic-compliantinvestorswillseetheattractions.”

HongKong,whichislosingitsroleasagatewaytothemainlandasShanghai’sfinancialmarketopens,iskeentobecomethelaunchpadfortheglobalambitionsofmainlandcompanies,includingbuildingroads,railwaysandportsalongthetraditionalSilkRoadtotheMiddleEast,AfricaandEurope.WhiletheSARismakingprogressafterputtinginlegislationforShariah-compliantbondsin2013,Singapore’saspirationsarestalling,highlightingthedifficultiesposedtocountriesorcitieswithsmallMuslimcommunities.

Thecityisconsideringsellingathirdsukuk,FinancialSecretaryJohnTsangChun-wahsaidinBudgetcomments,brighteningtheoutlookaftera29-percentslumpinglobalissuancein2015from$49.6billionthepreviousyear,whentheUK,LuxembourgandHongKongsoldsuchdebtforthefirsttime.

Thisyearisofftoabetterstart,with$5billioninworldwidesalescomparedwith$1.8billionayearearlier,datacompiledbyBloombergshow.Kenya,Nigeria,GhanaandMoroccoarealsoplanningdebuts.Offeringsclimbedtoarecord$51.6billionin2012.

Singapore’sDBSGroupHoldingscloseditsIslamicunitlastyearand,despiteintroducinglawsforShariah-compliantbondsin2006,saleshavesofarbeenlimitedtoenergycompanySwiberHoldings,SabanaShariah-CompliantIndustrialREIT(realestateinvestmenttrust),thecentralbankandhomesbuilderCityDevelopments.

InasigntheancientSilkRoadiscomingbacktolife,thefirstcargotrainfromChinatoIrancompleteditsjourneyinFebruaryfollowingtheliftingofinternationaleconomicsanctions.XitouredSaudiArabia,EgyptandIraninJanuarytodiscussenergycooperation,industrialparksanddiversifyingtrade.Tofunditsglobalpush,ChinaissettinguptheAsianInfrastructureInvestmentBank,pushingfortheyuantobeincludedinglobalreservesandopeningitsbondmarkettoforeigninvestors.

China’sroadpolicyoffersopportunitiesforIslamicfinancingandsukuk,saidBarzilaiatNortonRoseFulbright.WhiletheSARisinastrategicpositiontoaccessChina’slargeMuslimpopulation,itneedsstrongereffortstoharnessinvestordemandandimproveliquidity,saidAngusSalimAmran,theKualaLumpur-basedheadofmarketsatRHBInvestmentBank—Malaysia’ssecond-biggestIslamicbondsarranger.