Bonds of faith

Hong Kong's planned sukuk will pave the way for Chinese corporates to sell the debt in the city and pits it against financial rivals London and Singapore in the competition to become a global Islamic finance hub.

Hong Kong would offer its debut sharia-compliant bonds to develop capital markets, Au King-chi, a permanent secretary of the Financial Services and the Treasury Bureau, said in a November 8 statement. That came less than two weeks after Prime Minister David Cameron announced that Britain intended to sell Islamic notes.

The sale by Hong Kong, which gave sukuk equal tax treatment, would make it easier for issuance by companies from Greater China, Amanie Advisors said.

The city will compete with London, the largest currency trading venue, for a slice of an Islamic financial market that will more than double to US$2.7 trillion by 2017, according to PricewaterhouseCoopers.

"Hong Kong is the gateway to China, which is a very unique proposition," said Baiza Bain, a managing director at Amanie Advisors, a Kuala Lumpur-based Islamic finance consultancy. "The reason why governments would be doing it is to actually open the door for the corporates."

The city is considering amending regulations that will allow the government to sell sukuk, said a spokesman for the Financial Services and the Treasury. The spokesman declined to give any details on the timing or size of the offer.