KUALA LUMPUR: Malaysia plans to let issuers sell to individual investors Sukuk that can be traded on the local stock exchange as the government seeks to reverse a 24 percent decline in sales in the world's biggest market for Islamic bonds. Bursa Malaysia Bhd., the exchange operator, is working with regulators on rules to enable companies to issue Islamic debt that would be affordable to the public, Chief Executive Officer Yusli Yusoff said. Issuance of the securities fell to 19.8 billion ringgit ($6.4 billion) this year from 26.2 billion ringgit in 2009, the steepest drop since 2003. Malaysia, which accounts for more than 60 percent of the $130 billion of outstanding Sukuk, is turning to the public after enticing Islamic funds run by Aberdeen Asset Management Plc and Franklin Templeton Investments with tax breaks. The new bonds will broaden the investor base and improve pricing for Islamic debt, which pay asset returns to comply with the religion's ban on interest, according to Cagamas Bhd. and CIMB Group Holdings Bhd. “This will lead to better deal flows,” Badlisyah Abdul Ghani, chief executive officer of CIMB Islamic Bank Bhd., a Kuala Lumpur-based unit of CIMB Group, the world's top Sukuk arranger this year, said in an e-mailed reply to questions. “A retail offering would open up a new pool of capital.” CIMB plans to resume talks with potential issuers of debt targeted at individuals, he said. About 4.9 billion ringgit of notes may be issued in Malaysia before the end of the year, less than a quarter of planned sales in the Gulf. Malaysia's 10-year economic strategy plan will help spur sales of Sukuk, Prime Minister Najib Razak said at an Islamic conference in Kuala Lumpur Tuesday. “New issuance of sukuk may be cheaper, or else met by a high take-up rate, which will also increase its attractiveness,” Najib said. Bursa Malaysia is working on developing the sukuk for individual investors, Yusli said Tuesday at the same Islamic forum that ends on Oct. 28. “We're hoping that sometime next year we can get this off the ground,” he said. Individuals will be able to “access this asset class and undertake their own selection of Sukuk and manage their portfolio independently should they wish to,” he said last week. Global sales of Islamic bonds fell 24 percent to $12 billion in 2010 as debt restructurings in the Gulf and a slowing economic recovery reduced demand for higher-yielding assets, according to data compiled by Bloomberg. Sales from the Gulf are starting to pick up after Dubai World reached an agreement with 99 percent of its creditors in September to alter terms on $24.9 billion of debt. Pakistan's government may sell about 40 billion rupees ($466 million) of three-year Islamic bonds in the domestic market by the end of October.
