Malaysia: Sukuk market holds potential,but devoid of retail players
KUALA LUMPUR: The sukuk market has a lot of potential as an asset class, but is currently dominated by institutional investors with little opportunities for retail players, a forum was told yesterday.
OCBC’s consumer financial services chief Lim Wyson said sukuk provides predictability of yields, which is especially looked for by investors in a volatile market.
“It is not so volatile compared to equities,” he said at a talk on Islamic wealth management at the Global Islamic Finance Forum 5.0.
Lim stressed, however, that the “depth and width” of the sukuk market need to be developed.
“If you are able to widen and deepen the sukuk issuance, you can tap into the private wealth management part of the business,” he said.
Speaking to reporters later, Lim said most of the time, institutional investors are the first to buy during a sukuk issuance.
“Then there is left very little for the retail side. So one of the areas [to look into] is bigger development in terms of the number of issuance, liquidity so that retail investors have access to it,” he added.
Lim said the creations of more unit trusts with sukuk-investor type of funds will provide access for investors to participate in sukuk through a unit trust format.
“This is relating to investment mandates. Most of the syariah invested funds here are very concentrated in Malaysia or have a big allocation in Malaysia.
“What we are trying to find is more globally invested type of unit trust that is syariah-tied, that we will be able to give to our clients.
“That is the opportunity that we see, if we have more globally diversified mandates that are not so biased in terms of the heavyweight allocation to Malaysia. That is a demand seen in the market,” he added.
According to RAM Rating Services Bhd, global sukuk issuance totalled US$66.4 billion last year, with Malaysia being the world’s largest sukuk market.
In March 2015, Malaysia’s sukuk issuances accounted for 58% of the global US$308 billion outstanding sukuk.
Another speaker, Employees Provident Fund chief executive officer Datuk Shahril Ridza Ridzuan, said there has been limited growth in the global issuance of sukuk to certain issuing markets and issuers.
“Hopefully, if we can move away from this preoccupation with syariah financing purely on faith-based systems towards sustainability, then I think that’s the right way forward to improve growth of this market.