This Bank Has Become the Top Arranger in World's Largest Islamic Bond Market

  • Lender grabbed 27% of ringgit sukuk market versus 22% for CIMB
  • ‘Pipeline is there’ and funds flush with cash, Maybank says

Malayan Banking Bhd. is challenging CIMB Group Holdings Bhd.’s nine-year reign as the top arranger in the world’s largest Islamic bond market.

Malaysia’s biggest lender has managed 15.3 billion ringgit ($3.5 billion) of sukuk offerings in the nation in 2016, data compiled by Bloomberg show. It had a 27 percent market share versus 22 percent for CIMB. Maybank last arranged the most such securities 17 years ago. Issuance of Shariah-compliant debt climbed 50 percent to 60.3 billion ringgit this year, after dropping 14 percent to $56.2 billion in 2015, the least since 2011.

Maybank helped manage larger offerings such as those from subway financier DanaInfra Nasional Bhd. and power producer Sarawak Hidro Sdn., Michael Oh-Lau, regional head of debt markets, said in an interview in Kuala Lumpur Friday. Offerings in 2017 will match this year’s levels, driven by refinancing and fundraising for highways, railways and power plants, he said.

“The pipeline is there,” Oh-Lau said. “Demand for Malaysian sukuk will be supported by local institutional funds as they are still flush with cash.”

Maybank, which has total assets of 722.7 billion ringgit, is second so far this year to CIMB in global sukuk sales. CIMB said it had lead the global table for seven of the past nine years.

"We are seeing stiffer competition in the ringgit sukuk space this year, which bodes well for the Shariah-compliant debt market as a whole,” Mohamad Safri Shahul Hamid, deputy chief executive officer at its Islamic banking unit, said in an e-mailed statement. “CIMB has been active in both ringgit and global fronts and will continue to do so in our efforts to help bridge the demand-supply gap.”

Malaysia, which pioneered Islamic finance more than 30 years ago, held 31 percent of the $58 billion Shariah-compliant assets under management globally at the end of 2015, according to the Securities Commission. Banking assets that comply with religious tenets climbed to a record 715.6 billion ringgit, or 28 percent of the nation’s total, as of July 30, a Finance Ministry report shows.

Prime Minister Najib Razak is undertaking a multi-billion ringgit program to transform Malaysia into a developed economy by 2020. DanaInfra issued 9 billion ringgit of state-backed Islamic debt via two offerings, while Sarawak Hidro sold 5.5 billion ringgit of sukuk without a government guarantee, part of a drive to ease the nation’s fiscal liabilities. The power producer’s 2026 debt last yielded 4.31 percent on Oct. 27, 12 basis points lower than its coupon rate of 4.43 percent.

CIMB expects the global sukuk market to remain buoyant with sustained deal pipelines in the near-to-medium term and the ringgit Islamic debt to continue to dominate primary issuance in 2017, Mohamad Safri said.

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