Chinese groups tap into Malaysia’s sukuks
Proceeds from the bonds will be channeled to finance the project, Tadau Energy said in a statement.
Chinese property giant Country Garden’s Malaysian unit, Country Garden Real Estate, was the first Chinese company to issue Islamic bonds in Malaysia. In 2015, the group made a debut sales of sukuk from a 1.5 billion ringgit program.
Lee Heng Guie, the executive director of the Socio-Economic Research Center, said that more Chinese companies are looking into sukuk as the Malaysian government has been promoting it.
Moreover, it has also been proven that sukuk is more stable when the market is weak.
He added that the participation of Chinese companies in the sukuk market will spur market activities in Malaysia’s capital market, and Malaysian banks will therefore benefit along the funding chain.
Malaysia’s sukuk market accounted for 41.1 percent of total global sukuk market of $72.9 billion in 2016, according to RAM Rating Services.
Last year, Malaysia’s domestic sukuk market stood at 661.9 billion ringgit, 9 percent higher than 608.5 billion ringgit in 2015. It was also 29 percent higher when compared with the total outstanding domestic conventional bond market of 513 billion ringgit in the same year.
Despite weak market conditions, analysts shrugged off concerns over subscription.
“From institutional investors’ point of views, there is always a demand for sukuk, because most insurance companies, pension funds, or even government agencies, prefer to invest in sukuk for their Syariah (Islamic religious law) compliance mandate,” Phillip Mutual Bhd Chief Strategist Officer Phua Lee Kerk said.