Malaysia eyes Hong Kong listing for first Islamic exchange-traded bonds

World's first retail Islamic exchange-traded bond may be offered in city after December sale in KL

PUBLISHED : Friday, 12 October, 2012, 12:00am
UPDATED : Friday, 12 October, 2012, 3:25am

Bursa Malaysia, the operator of the Southeast Asian country's stock exchange, plans to list the world's first retail Islamic exchange-traded bond (ETB) in Malaysia in December, which may lead to a listing in Hong Kong - if there is demand.

The exchange's chief executive Tajuddin Atan said Islamic bonds, known as sukuk and structured in a way to meet Islamic requirements, were usually only available for institutional investors in the over-the counter market.

DanaInfra Nasional, a state-owned infrastructure company, plans to issue 300 million ringgit (HK$756 million) worth of exchange-traded bonds by year-end to finance mass rapid transit development projects.

Tajuddin said the bonds would be listed on the Malaysian bourse as the first retail Islamic exchange-traded bond.

"By listing a retail exchange-traded bond, we will make it easier for investors from Malaysia or Hong Kong to trade in the sukuk easily," he said.

"If this retail Islamic ETB is popular with Hong Kong investors, the issuer may consider listing it on the stock exchange of Hong Kong," he said, adding that Bursa Malaysia had always wanted to tap the Hong Kong market.

"We may not be the biggest exchange worldwide but we have a lot of unique features. Hong Kong investors who are interested in Islamic finance can invest in Bursa Malaysia, which has comprehensive investment products."

Malaysia accounted for 70 per cent of global sukuk new issuance in the first nine months of this year. Bursa Malaysia has 88 per cent of its companies sharia compliant and there are several sharia compliant commodities traded on the exchange.

Tajuddin said many Hong Kong investors had already invested in the Malaysian stock exchange, taking advantage of high profit growth due to rising economic prospects in Malaysia and other Southeast Asian countries such as Thailand, Indonesia and Singapore.

Sun Hung Kai Financial executive director Joseph Tong Tang said local investors might be interested in the exchange-traded bonds given the uncertain market conditions.

"Many Hong Kong investors now prefer investing in low-risk products, and bond issuances are popular. If the Malaysia ETB can provide a good and stable return to Hong Kong investors, it would be popular," Tong said.

Financial Secretary John Tsang Chun-wah in 2007 urged turning Hong Kong into an Islamic financial centre to tap the US$1 trillion market for Islamic bonds. Four years on, no company has issued any sukuk as tax experts say local tax laws discourage companies from doing so.