RM100b corporate bonds, sukuk issuances to be expected


THE Securities Commission Malaysia (SC) is expecting up to RM100 billion worth of corporate bonds and sukuk issuance this year, based on industry feedback amid the Covid-19 pandemic.

Over the past three years, sukuk accounted for an average of 70% of corporate issuances.

“We don’t foresee any specific reason for this propulsion to be significantly different this year due to the large pool of demand for Shariah-compliant investment products,” SC deputy CEO Datuk Zainal Izlan Zainal Abidin (picture) said via a video conference yesterday.

The regulator said the Covid-19 outbreak and the resultant disruption on businesses have, however, affected fundraising activities, thus, making it harder for the SC to project the size of fundraising in the current environment.

Zainal Izlan said any non-payment of profit or principle of sukuk arising from the current challenging operating landscape is “very likely” due to credit rather than Shariah issues and would therefore be dealt with from a credit perspective, just like conventional bonds.

The Islamic finance and Islamic capital markets (ICMs) offer significant opportunities, given what the regulator is witnessing.

Zainal Izlan noted that even before the Covid-19 outbreak, there have been conversations on the alignment between the underlying principles of Islamic finance and sustainable and responsible investing.

The SC has been a key proponent in this area of seeking the convergence between the two segments of the financial industry.

“We believe this would continue and given the current environment, there is a greater need for social projects to be funded, and Islamic finance and ICM can certainly come into place.

“So apart from just socially responsible investing (SRI) or sustainable development goal bonds or sukuk, we are also expected to see other innovation in the market,” he said.

Zainal Izlan cited an example where the SC is working on and facilitating the offering of waqaf-based collective investment schemes to complement the range of products the industry has in the social finance space, particularly in the ICM.

In its Annual Report 2019 released yesterday, the SC said Malaysia continues to maintain its leadership in the ICM, particularly in relation to the issuance of sukuk and Islamic funds — solidifying efforts to enhance its role as a prominent international centre for Islamic fund and wealth management.

The SC noted that ICM represented 63.57% of Malaysia’s capital market, with market size of RM2.04 trillion as of December 2019, an 8.23% growth over 2018.

The year saw sukuk issuances valued at RM102.39 billion, representing 77.09% of total corporate issuances, while Islamic assets under management stood at RM180.52 billion, making up 21.93% of the fund management industry.

Shariah-compliant securities comprised 64.06% of total equity market capitalisation and were valued at RM1.096 trillion, the SC said.

The SC added that the Islamic fund management industry also witnessed new and innovative investment product offerings. These include Islamic exchange-traded funds based on gold, SRI Islamic funds, as well as social and green sukuk.

As of December 2019, there are 23 full-fledged Islamic fund management companies.