Islamic-compliant funding attracting growing attention of mainland investors

KUALA LUMPUR — Raising funds through Islamic bonds, or sukuks, in Malaysia has gained traction among Chinese corporations. They have been raising funds over the past few weeks through Islamic bonds in the Southeast Asian nation, which has positioned itself as an Islamic funds hub.

Last week, China-owned Edra Power Holdings’ solar energy unit Tadau Energy announced it had issued a Sustainable Responsible Investment Sukuk of up to 250million-ringgit ($58.36 million), the first green sukuk issued in Malaysia.

Two weeks ago, Chinese Beijing Enterprises Water Group’s subsidiary BEWG Malaysia made its debut in the Malaysian sukuk market by issuing 400-million-ringgit in Islamic medium term notes, the first-ever ringgit denominated sukuk on water infrastructure by a Chinese Stateowned enterprise.

“We are heartened by the government-driven initiatives in this space and we do expect more Chinese companies to participate in the domestic infrastructure space,” John Chong, the chief executive officer of Maybank Kim Eng Group and Maybank Investment Bank, told Xinhua.

Malaysian investors can expect more sukuk fund raising to take place moving forward, supported and supplemented by other banking solutions, he said.

Citing BEWG Malaysia as an example, Chong said as some Chinese companies grow bigger in Malaysia, there should be an increased appetite for them to diversify funding avenues into the domestic sukuk or bond market.

Analysts said the participa-

share of the total global sukuk market taken by Malaysia in 2016

tion of Chinese companies in Malaysia’s Islamic finance market is in line with Malaysian government policy to promote the country as an Islamic funds hub.

Hong Leong Investment Bank analyst, Khairul Azizi Kairudin, said the main reason for more Chinese companies raising sukuk lately is global investors tend to see Malaysia as an Islamic hub, a suitable destination for sukuk.

He saw the possibilities that more Chinese companies would raise funds in the sukuk market going forward, as there are more Chinese companies partnering with local entities to undertake projects in Malaysia, especially in the construction industry.

BEWG Malaysia’s Chief Executive Officer, Ong Kian Min, explained that the group chose to raise funds via sukuk in Malaysia as the country has the largest Islamic capital market.

The proceeds from the sukuk will be used to finance the refurbishment and upgrading of a water treatment plant project that has been awarded by a Malaysian state government, according to Ong.

Meanwhile, Tadau Energy is a project company undertaking a large-scale solar project in Malaysia’s Sabah state on North Borneo under two 21-year power purchase agreements entered into with Sabah Electricity in December