| GEO Business|
| Asian Sukuk market stays resilient: Moody's|
| Updated at: 2041 PST, Thursday, April 23, 2009|
KARACHI: The Asian sukuk market is showing resilience and good long-term prospects in face of challenges, according to Moody's Investors Service.
Its vice president of business development, Dominique Gribot-Carroz, said most of the current challenges resulted from the adverse nature of the global credit environment and the associated increase in risk perceptions and widening of spread.
"Despite the drop in volume, it is encouraging to note that sovereign sukuk issuance has already brought significant vitality to the Asian market in 2009," said Gribot-Carroz, the author of a new Moody's report on the Asian sukuk sector.
Global sukuk outstanding at end-2008 amounted to US$103.6 billion, of which 62 percent was Asian currency-denominated and 26 percent US-dollar denominated.
From the perspective of promising prospects, issuing sukuk in Malaysia, a market where investors are already familiar with the instrument, could be an option for institutions seeking funding for foreign infrastructure projects, for example, in Thailand or China, the report said.
Malaysia, the world's largest sukuk market, remained an active sovereign sukuk issuer while Singapore and Hong Kong are likely to continue their efforts to position themselves as efficient platforms for sukuk issuances, it said.
However, various key issues need to be resolved over the longer term, for example, the ongoing absence of standardised commercial and technical criteria, Gribot-Carroz said.
The sukuk market globally remained a relatively young asset class and faced problems typical of any new market, he said.
"Even before the present financial crisis, liquidity on the secondary sukuk markets was quite limited, while the fact that most sukuk investors have always adopted a buy-and-hold strategy only exacerbates the problems," he added.