The decision by the Hong Kong government not to issue a sovereign Sukuk back in 2007 was a consequence of the global financial crisis and its impact on the cost of raising funding. However the funding is no longer needed in any case. Hong Kong was never likely to be an Islamic finance powerhouse even if the Sukuk had gone ahead. Singapore is better positioned geographically, but even it has not succeeded. Despite the fact that there has been no sterling sovereign Sukuk, London is better placed as an international centre for Shariah compliant asset management. It has long standing financial links with the Gulf and hosts a large number of Middle Eastern financial institutions. It is unclear what role Hong Kong can play.
PROFESSOR RODNEY WILSON
Ido not believe it does dampen its efforts. The markets have not been suitable during this period and I believe their sanity would be questioned if they did come to market with a Sukuk at all costs. Hopefully 2011 and 2012 will provide better market conditions. DAUD VICARY ABDULLAH: Managing director, DVA Consulting
Of course, without local Sukuk issuance which provides the necessary liquidity and depth I think it is very difficult to establish oneself as a local hub. Many governments seem to like the publicity of proposed Sukuk issuance but increasingly do not seem to follow through (most recently UK). KHALID F HOWLADAR Senior credit officer, asset backed and Sukuk finance, Moody’s Middle East
Like any other financial institution, Islamic financial institutions require access to sovereign paper for the purpose of effective risk management and capital adequacy. Although Hong Kong based Islamic financial institutions will have access to Malaysian paper, this may not attract the same treatment for capital adequacy purposes, and may adversely impact any Islamic financial operation in Hong Kong. Due to the fact that Hong Kong’s country credit rating is ‘AA+’ (compared to ‘A’ for Malaysia) , sovereign paper issued by Hong Kong will be attractive for the Islamic financial industry where highly rated paper is relatively scarce. DR NATALIE SCHOON Head of product research, Bank of London and the Middle East
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