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Tuesday, 25 November 2008

Hong Kong confident financial turmoil won’t derail Islamic banking plans

HONG KONG, Nov 25 — The global financial crisis will not upset Hong Kong's plans to become an Islamic banking centre as it sets its eyes on the China and the Middle East markets.
"Our priority is to push ahead with the development of an Islamic bond market. There should be no doubt about our determination to establish a platform for Islamic finance in Hong Kong," Hong Kong Monetary Authority (HKMA) deputy chief executive Eddie Yue said today.
Yue said there was long-term potential in Islamic finance and it was a priority for Hong Kong to tweak its tax regime to provide a level-playing field for Syariah-compliant finance transactions.
"We believe that this is a good time to do the groundwork of installing the necessary legal, taxation and market infrastructure," he told a one-day forum on Islamic finance here.
He said the sharp falls in the Islamic finance markets, including for sukuk or Islamic bonds and also Islamic funded equities, had more to do with the general market conditions and a reluctance to issue US dollar instruments.
"This also reflects how closely integrated Islamic finance is with the global financial system, which is not at all bad news for the industry because when global markets stabilise and take a turn for the better — as they must in the long run — Islamic finance will ride on that curve and excel," he said.
Hong Kong, long established as a conventional financial hub in Asia, moved into Islamic banking last year to tap into the growing pool of Islamic assets that are tipped to swell to US$1 trillion by 2010 and vast millions to be raise for infrastructure projects in the Gulf region.
Yue stressed Hong Kong's links and proximity with China as a key strength in developing an Islamic finance market.
"Our close and increasing economic cooperation with the mainland undoubtedly makes Hong Kong the natural choice for anyone wishing to tap into China's high savings rate and huge growth potential," he said.
"There are opportunities for us to extend our reach to potential Islamic investors and financiers in the Middle East and Asia. The addition of Islamic finance as a new asset class in our financial system will add value to Hong Kong as a thriving financial centre and a leading financial services hub in Asia," he added.
At the forum, Yue witnessed a memorandum of understanding between the Hong Kong branches of Malaysia-based CIMB Islamic and Hong Leong banks for the the former's first Syariah-compliant product in the island city, an interbank money product backed by commodities.
The two banks are the first to offer Islamic banking in Hong Kong.
CIMB Islamic chief executive officer Badlisyah Abdul Ghani noted Hong Kong's commitment to establish its Islamic banking centre.
He said size and liquidity would dictate how fast Hong Kong could grow its Islamic banking pie.
"I think they have made a strong effort on the regulatory side to support that. A lot will depend on the speed of issuances, if there are more issuances, the better," Badlisyah said.
CIMB Islamic is the global leader in sukuk issuance with a 20 per cent share. — Bernama

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