01/03/2016 11:33 AST
Hong Kong’s possible third Islamic global bond in three years brings it closer to Indonesia and Malaysia in terms of sovereign sukuk presence, a boost to the market that coincides with China’s Silk Road revival.
The finance center has already raised $2 billion from sales in 2014 and 2015, which attracted $6.7 billion in total orders, while Indonesia plans to tap investors for the sixth year running and Malaysia is returning for its seventh offering. While the city only has 270,000 people following the teachings of the Koran, it’s positioning itself as a vital port and financing hub for China’s ‘One Belt One Road’ policy announced by President Xi Jinping in 2013.
“The announcement is a great sign of Hong Kong’s continued wish to be at the center of people’s minds when it comes to Islamic financing in Asia, particularly as momentum builds around China’s belt and road initiative,” said Davide Barzilai, Hong Kong-based head of Islamic Finance for Asia Pacific at law firm Norton Rose Fulbright. "We will find that Islamic-compliant investors will see the attractions.”
Hong Kong, which is losing its role as a gateway to China as Shanghai’s financial market opens, is keen to become the launchpad for the global ambitions of Chinese companies, including building roads, railways and ports along the traditional Silk Road to the Middle East, Africa and Europe. While the ex-British colony is making progress after putting in legislation for Shariah-compliant bonds in 2013, Singapore’s aspirations are stalling, highlighting the difficulties posed to countries or cities with small Muslim communities.
The city is considering selling a third sukuk, Financial Secretary John Tsang said in budget comments, brightening the outlook after a 29 percent slump in global issuance in 2015 from $49.6 billion the previous year, when the U.K., Luxembourg and Hong Kong sold such debt for the first time.
2016 is off to a better start, with $5 billion in worldwide sales compared with $1.8 billion a year earlier, data compiled by Bloomberg show. Kenya, Nigeria, Ghana and Morocco are also planning debuts. Offerings climbed to a record $51.6 billion in 2012.
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