SINGAPORE—Sukuk bond investors see good prospects for the specialized capital market in the Philippines, but would rather wait for a benchmark issue before embarking on such issuances in the country, regional banking giant Maybank said.
At the sidelines of Maybank’s Invest Asean conference in Singapore, Maybank Kim Eng Group CEO John Chong said the Philippines can tap into the unused potential of the sukuk market in the country for its funding needs.
“I think there is opportunity for the Philippines…so, I think, No. 1, is you need to create a benchmark issue to capture it and subsequently I think the sukuk market can be developed onshore in the Philippines, but you have to start off by creating a benchmark,” Chong told members of the Philippine media at the conference.
Sukuks are the Islamic equivalent of the conventional global bonds that comply with sharia, or the Islamic law. A benchmark issuance, meanwhile, is a bond that will provide a standard measure of performance against other bonds. Government-issued bonds are usually used as the benchmark bond.
There have been pronouncements in 2014 from the National Treasurer on the issuance of the first sukuk
bonds in the country to raise funds and attract Islamic investors. The plan, however, has not been pursued yet.
“I think there is great potential in Asean year by year. I think, in other countries, they are creating the benchmark issues. So, I think, that is the first thing to do for the Philippines,” Chong said.
Aside from benchmark bonds, Chong also said tax issues must also be cleared before investors and banks can come in and invest or issue bonds in the country.
“Because sukuk is obviously a special-purpose vehicle, all these must be tax-neutral to the issuer or it doesn’t make sense for them to do it. Singapore and Malaysia are doing this already,” Chong said.
Regional banking giant Maybank is one of the largest global players in the sukuk arena, emerging in the top 3 in the global sukuk market among banks. It is, likewise, one of the banks with the top Islamic banking services globally.