Sukuk & Capital Market - Islamic Finance News

editor’s note
Market resurgence
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The last year has seen unprecedented growth in the Gulf Sukuk market, with
major issuances spurring its primary Sukuk market, and new entrants such as
Turkey creating diversity in the issuance space. Although Malaysia currently
dominates the global issuance table, making up 60% of global Islamic issuances,
the challenge to attract cross-border investments and Middle East issuers still
remains a hurdle in the country’s bid to create a dynamic and internationally
attractive capital market.
For any capital market to be successful, clear laws and precedence are important
elements in attracting foreign issuers and creating a sustainable market. Past
defaults and the current global economic environment has further pushed the
need for transparency, proper regulations and clear-cut tax laws in order to attract
major issuers and to create investor confidence in the market. Diversity amongst
investors is also fundamental in avoiding too much concentration in one single
geographical area to mitigate risk from an issuer’s perspective.
Analysts have projected a continued rise in demand for Sukuk particularly in the
infrastructure and project finance space; in the GCC, Arab Spring countries and
Asia moving forward. Tapping the Sukuk market could help improve the capital
structure and liquidity profiles of GCC and Asian companies, particularly those
operating in capital-intensive industries such as infrastructure. It could also
provide such companies the longer-term funding they need via a different funding
source. This is expected to create more depth and substance in the Sukuk and
capital market space, and also ties in with the need to tether Islamic finance to
the real economy.
In this issue of Islamic Finance news Supplements, we take a comprehensive
look at the current Islamic capital market landscape; its issues and challenges,
as well as the meteoric rise in capital market issuances. We also examine the
secondary markets, which has seen development over the years, but still requires
much more attention in order to create more depth and sustainability. The private
equity and venture capital sector also take center stage in this issue; in which we
question the habits and intentions of Islamic investors who are eager to reap the
rewards but still shy away from risk.
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