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Friday, 31 August 2007

Asian Sukuk poised for fast growth, not only in Malaysia

HONG KONG: The prospects for the markets in Sukuk or Islamic bonds and Islamic financing in general are very encouraging in Asia and this outlook goes beyond predominantly Muslim countries, said Moody's Investors Service. "Globally, the Malaysian market now accounts for most outstanding Sukuk, but interest is growing in the rest of Asia, obviously in jurisdictions such as Indonesia and Pakistan, but also, for example, in Singapore and most recently Hong Kong," says Dominique Gribot-Carroz, Moody's assistant vice president. "By end-July 2007, outstanding Sukuk globally totalled US$82.36 billion (RM288.3 billion), of which close to 62% was denominated in Malaysian ringgit," she said. "Impressively, for what began as a conventional financial system, more than 70% of all Malaysian corporate borrowing was Islamic in 2005," she added. Gribot-Carroz's remarks coincided with the release of an introduction to Moody's rating of Sukuk in Asia, and in which she examines the market's key features and examples of rating assignments in the region. "From the perspective of market growth, the key lesson from the experience of Malaysia is the need for and effectiveness of coordination between the government and regulatory authorities," says Gribot-Carroz, who is based in Hong Kong. Sukuk are better described as "trust certificates" or "participation securities" that grant the investor a share of an asset along with the cash flows and risk commensurate with such ownership. Inherent to the definition is compliance with Syariah or Islamic law. "From Moody's viewpoint, the Sukuk and Islamic bond markets are relatively new and growing fast," said Gribot-Carroz. - (TDE, 29 Aug 07)

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