Lawmakers to hear briefing on Islamic bonds
Government questioned on costs and demand in view of small Muslim community in city
With government officials set to brief lawmakers today on a proposed law change next year to allow the government's bond programme to issue Islamic bonds, fund managers and brokers have warned that developing the city into an Islamic finance hub will not be easy.
Financial Secretary John Tsang Chun-wah wants Hong Kong to capture some of that business, but analysts say that competing with Malaysia, Singapore and Britain as an international Islamic finance centre will be a challenge, pointing out that little progress has been made since Tsang pledged to develop Islamic finance in 2007.
The government plans to submit the Loans (Amendment) Bill in the first quarter of next year to allow it to issue the bonds, also known as sukuk, under the government bond programme. A law change is needed because a sukuk needs to comply with religious requirements.
In a paper given to legislators, the government said the planned sukuk issuance was "in response to the prevailing market conditions and needs" and it hoped that by taking the lead it would encourage other public or private companies to follow suit. It did not have a timetable for issuance or the size being considered.
"We expect that, given the shortage of highly rated sukuk in the international capital markets, an inaugural sukuk issuance originated by the government of Hong Kong SAR will … attract a new group of investors from the Middle East and other parts of the world to Hong Kong's financial platform," the paper said.