05 October 2011
MUSCAT: Oman's corporate sector is expected to come out with sukuk or Islamic bond issues to meet their funding requirements, once the market watchdog Capital Market Authority (CMA) issues regulations.
Sukuks, which are Sharia-compliant debt instruments backed by assets, are popular instruments for mopping up funds from the market in the Gulf region.
"With the government allowing Islamic banking activity in the country, I think the sukuk issue also will be floated in the country soon," Ahmed bin Saleh Al Marhoon, director-general of the Muscat Securities Market (MSM) told 'Times of Oman', on the sidelines of Second Oman Capital Market Forum here yesterday. CMA will come out with certain regulations for issuing sukuks, he added.
Marhoon said Al Madina Real Estate Company had approached CMA for floating sukuk last year. "Since sukuk (instrument) was not permitted at that point of time, the regulating authorities did not give the go ahead," he said, adding: "The company will seek permission from CMA for sukuk once again."
The market regulator recently granted the initial approval to Al Madina Gulf Insurance Company, the insurance outfit of Al Madina group, to become a full fledged takaful company.
CMA regulation
Presently, as per the regulation, only listed firms can issue bonds. The CMA has to change this regulation, as several non-listed business houses are interested in tapping the market with debt instruments like sukuks.
Marhoon said although the conventional debt market is inactive in Oman, a section of investors in the country prefer to invest in Sharia-compliant products like sukuk. "Therefore, I believe this is going to be more active than conventional bonds.
Earlier, while making a presentation on trends in Gulf Cooperation Council (GCC) sukuk market at the Oman Capital Market Forum, Nasir Ali Merchant, acting chief executive of Islamic International Rating Agency, said that a small debt market, lack of secondary trading and absence of ratings are all affecting sukuk issuance in the GCC region. "Out of the total 275 sukuk issues in the Gulf region over the last ten years, only 20 per cent were rated," he added.
Malaysia by contrast ensures that all the local currency issues are rated by a local rating agency.
He added that GCC region accounted only 16 per cent of the total 2,000 sukuks issued in the last ten years in terms of number of issues, while Malaysia accounted for 66 per cent. However, in terms of the total value (of $260 billion), GCC region accounted for 30 per cent and Malaysia accounted for only 63 per cent.
Citing major differences between Malaysia and GCC region in sukuk issuance, Merchant said the average issue size of Malaysian sukuk is around $126 million, while this is almost double in GCC at $243 million.
In terms of profile of issuers, in Malaysia, out of the total 1,300 issues, sovereign/quasi sovereign have 27 per cent while the corporates have 73 per cent share.
"For GCC, out of the total 275 issues, sovereign/quasi sovereign have 74 per cent, while the corporates have only 26 per cent share," said Merchant, adding: "Even within the corporate sector, most of the sukuk issuers in GCC are financial institutions while in Malaysia, this is well spread into a large number of economic sectors."
This, he said, leads to the belief that Sukuk issuance in GCC is 'a big boys game' while in Malaysia even the relatively mid-sized corporates have tapped into the Sukuk market for their funding requirement.
MUSCAT: Oman's corporate sector is expected to come out with sukuk or Islamic bond issues to meet their funding requirements, once the market watchdog Capital Market Authority (CMA) issues regulations.
Sukuks, which are Sharia-compliant debt instruments backed by assets, are popular instruments for mopping up funds from the market in the Gulf region.
"With the government allowing Islamic banking activity in the country, I think the sukuk issue also will be floated in the country soon," Ahmed bin Saleh Al Marhoon, director-general of the Muscat Securities Market (MSM) told 'Times of Oman', on the sidelines of Second Oman Capital Market Forum here yesterday. CMA will come out with certain regulations for issuing sukuks, he added.
Marhoon said Al Madina Real Estate Company had approached CMA for floating sukuk last year. "Since sukuk (instrument) was not permitted at that point of time, the regulating authorities did not give the go ahead," he said, adding: "The company will seek permission from CMA for sukuk once again."
The market regulator recently granted the initial approval to Al Madina Gulf Insurance Company, the insurance outfit of Al Madina group, to become a full fledged takaful company.
CMA regulation
Presently, as per the regulation, only listed firms can issue bonds. The CMA has to change this regulation, as several non-listed business houses are interested in tapping the market with debt instruments like sukuks.
Marhoon said although the conventional debt market is inactive in Oman, a section of investors in the country prefer to invest in Sharia-compliant products like sukuk. "Therefore, I believe this is going to be more active than conventional bonds.
Earlier, while making a presentation on trends in Gulf Cooperation Council (GCC) sukuk market at the Oman Capital Market Forum, Nasir Ali Merchant, acting chief executive of Islamic International Rating Agency, said that a small debt market, lack of secondary trading and absence of ratings are all affecting sukuk issuance in the GCC region. "Out of the total 275 sukuk issues in the Gulf region over the last ten years, only 20 per cent were rated," he added.
Malaysia by contrast ensures that all the local currency issues are rated by a local rating agency.
He added that GCC region accounted only 16 per cent of the total 2,000 sukuks issued in the last ten years in terms of number of issues, while Malaysia accounted for 66 per cent. However, in terms of the total value (of $260 billion), GCC region accounted for 30 per cent and Malaysia accounted for only 63 per cent.
Citing major differences between Malaysia and GCC region in sukuk issuance, Merchant said the average issue size of Malaysian sukuk is around $126 million, while this is almost double in GCC at $243 million.
In terms of profile of issuers, in Malaysia, out of the total 1,300 issues, sovereign/quasi sovereign have 27 per cent while the corporates have 73 per cent share.
"For GCC, out of the total 275 issues, sovereign/quasi sovereign have 74 per cent, while the corporates have only 26 per cent share," said Merchant, adding: "Even within the corporate sector, most of the sukuk issuers in GCC are financial institutions while in Malaysia, this is well spread into a large number of economic sectors."
This, he said, leads to the belief that Sukuk issuance in GCC is 'a big boys game' while in Malaysia even the relatively mid-sized corporates have tapped into the Sukuk market for their funding requirement.
© Times of Oman 2011
