Hong Kong to leverage role as international financial hub to lure Middle East investors
Hong Kong is planning to establish an Islamic bond market to tap investors in the Middle East and elsewhere who may seek opportunities in the mainland market, Financial Secretary John Tsang Chun-wah said.
'The Islamic financial market is worth an estimated US$1 trillion and is expected to grow by 15 per cent annually,' Mr Tsang said yesterday at an investment conference.
Islamic bonds would have to comply with Shariah or Islamic law. They do not pay interest, which is banned as usury under Islamic law, and are structured as profit-sharing or rental agreements underpinned by physical assets.
Some bankers, however, have cast doubts on the wisdom of Mr Tsang's suggestion, saying that Hong Kong was at a disadvantage compared with Singapore, Malaysia and even London, which already have established Islamic bond markets.
Malaysia has the world's largest Islamic bond market, worth about US$47 billion, or two-thirds of all such bonds worldwide. Singapore and Indonesia also have large Islamic communities and have a better understanding of the culture.
'At least the government [of Hong Kong] can take the lead and give incentives for the development of such a market,' said a banker who asked not to be named. 'Otherwise, it's not easy for the Hong Kong financial community to develop an Islamic bond market.'