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 BAIZA BAIN, AMANIE ADVISORS "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. Khazanah Nasional, a Malaysian state-owned investment company, sold the world's first yuan-denominated sharia note in Hong Kong in 2011. Hong Kong-based Noble Group, Asia's largest trader of commodities, started a 3 billion ringgit (HK$7.25 billion) Islamic bond programme in Kuala Lumpur last year. Standard Chartered and AmInvestment Bank said in July that they were reaching out to companies in Greater China to boost Islamic finance awareness after Hong Kong revised its laws to exempt sharia-compliant notes from being taxed on the transfer of underlying assets. "A benchmark issue from the Hong Kong government will send a strong message to the market," said Davide Barzilai, the Asia-Pacific Islamic finance head at law firm Norton Rose Fulbright. "With Hong Kong's strong capital markets and banking community, Hong Kong will be well-placed to develop as an Islamic finance hub." In Asia, Hong Kong will compete with Singapore, which this year became the region's top currency trading centre. Singapore had S$130 million (HK$807.35 million) of Islamic debt sales last year. That is only about 1 per cent of the 326.5 billion ringgit of issuance in Malaysia, the world's largest sukuk market and a pioneer of Islamic finance, official data shows. Hong Kong's move was probably because of "a desire to maintain its status as a leading financial centre for both conventional as well as Islamic finance", said Megat Hizaini Hassan, the head of the Islamic finance practice at law firm Lee Hishammuddin Allen & Gledhill in Kuala Lumpur. "The regulators in Hong Kong may need to convince potential issuers, advisers and arrangers to come to Hong Kong to issue sukuk." International sukuk sales have fallen 20 per cent this year to US$34.8 billion after reaching a record US$46.5 billion for the whole of last year, data shows. The decline was partly because efforts to promote issuance in non-Muslim nations had proven ineffective, said Badlisyah Abdul Ghani, the chief executive of CIMB Islamic Bank, a unit of Malaysia's second-largest lender. Rising yields have also helped suppress sales, with the average rate on Islamic notes climbing 110 basis points, or 1.1 percentage points, to 3.91 per cent, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index. "We may be reaching a tipping point in key non-Muslim countries," Barzilai said. "The Hong Kong and UK markets are complementary. "The UK is more closely aligned to Europe and the Middle East and Hong Kong's natural alignment is to China and the wider Asia-Pacific region."