While there is not a lot of activity in most of the investment and capital markets products in Islamic finance, the interest is sukuk continues to rise. With the uncertainty over returns on equity, and the continuous turmoil in the global financial markets, Islamic finance is providing a hope for not the Islamic institutions (sovereign and corporate alike) but also to conventional financial institutions that are suffering from the lack of liquidity in the Western financial markets. In a reversal of fortune, Malaysia is now feeding liquidity into the GCC markets that remained unkind to Malaysian institutions before the financial crisis ensued in 2007/08. True to “Malaysian Hospitality,” Kuala Lumpur is actively involved in arranging for liquidity for the sovereign and corporate businesses in the GCC. Consequently, the largest number of sukuk issued worldwide has a Malaysian connection. It, therefore, seems that the days are gone when finding a sakk (plural sukuk) for trading or portfolio management was nearly impossible. The recent launch of the AmDynamic Sukuk Fund by AmIslamic Funds Management (AIFM) is in line with the trend. Earlier this year, HSBC, Al Hilal, Rasameel, and NBAD issued their own sukuk funds. The AmDynamic Sukuk Fund is denominated in Ringgit Malaysia and aims to provide capital appreciation by investing primarily in Malaysian sukuk but also globally. The recent wave of sukuk funds and their success is in contrast to the failed attempts like Sanad Sukuk Fund, which was launched in 2006 but failed to attract any meaningful size of investments. “AIFM will rely on its stringent Shariah-compliant investment process coupled with superior credit selection, through its proprietary in-house credit research unit to find favourable returns in light of calculated risks, among other considerations. We will also consider sukuk with favourable or improving credit outlook that provide the capital appreciation for these investments,” said Datin Maznah Mahbob, Chief Executive Officer of FMD, a member of the AmBank Group. She added, “The sukuk market has registered remarkable growth and it is an asset class with growing investment opportunities and is essential for portfolio diversification. Compared to the asset class of equities which is subject to uncertainty and volatility, sukuk has so far outperformed Islamic and conventional equities. Over the last five years, sukuk had registered positive returns of 24% while Islamic equities and conventional equities indexes ended in the red by producing negative returns of -14% and -27% respectively. Sukuk’s total returns of 24% have even outperformed its returns from conventional bonds by three times over the same period as well.”
