Moderator Abdulkader Thomas kicked off the session by asking the panelists, “What does it take to issue successfully?” Hazimi Kassim, sharing Maybank’s experience, said two things are important — the financial adviser and Shariah advisers. “The financial adviser must be able to meet our requirements and have good technical experience and knowledge. As for Shariah advisers, it depends where you want to distribute. If you want to distribute in the Middle East, then it is important to have a pool of Shariah advisers who are reputable and have deep experience in the Middle East because the first question that you will encounter from Middle East investors is, ‘Who is your Shariah adviser?’” he said.

Mohd Izani Ghani then pointed out that planning for the issuance is the most important factor. “Time is key. For example, July or August is a no-no for road shows in the GCC — they would not be there because they are out on summer holiday,” he shared. Structuring capability (i.e. the ability to come up with innovative structures), distribution capability and timeline that the advisers are ready to commit is imperative to achieve a successful issuance, he said. Asmadi then added that besides financial advisers, other advisers such as traffic consultants (if it involves highway construction, for example), accountants and lawyers are equally important. Using reputable advisers would pay off during the marketing of the issuance, he reminded.

In responding to Abdulkader’s question as to the reasons for selecting a particular product or structure, Roslan Ahmad said it depends on investor demand and what underlying asset the issuer has. Khazanah and Maybank shared the same philosophy when selecting a product — widening the investors base. Their approach would then be to select a product structure that will be acceptable in the Middle East.

Regarding consideration as to where to list, Hazimi and Izani again echoed the same point — easiness to list would be the main factor and, of course, the customer base that the issuer is planning to tap into. “We decided to list our first Khazanah Sukuk in Labuan and Hong Kong. Hong Kong really had speedy approval and this made the listing easy. As for our second issuance, we decided to list it in Dubai as well because we wanted to tap Middle Eastern investors. The Dubai authority was really helpful because they managed to approve the listing within only two weeks,” Izani elucidated. Asmadi added: “All this while, Sukuk has been more of a debt structure — equivalent to a conventional bond. Nowadays, the trend is changing. We could witness more equity like Sukuk structures. Thus the challenge would be to list Islamic equity Sukuk on Bursa Malaysia, for example. If the listing requirement is tedious, then issuers may decide to go just for institutional investors rather than the retail market.”

In an attempt to bring more foreign issuers to Malaysia, tax incentives and simplification of rules and regulation are important, said Hazimi. However, it would again depend on the issuer in considering their target market. “Besides how easy, how fast and how cheap transactions would be in Malaysia, international issuers would also look at how much of an investor base in Malaysia they could tap into. This means that if we have more investors in Malaysia looking for international papers, this will in turn attract international issuers to come in and issue from Malaysia,” he stressed.

As for the impact of the subprime market on Sukuk issuance, all the panelists seemed to be of the view that while the international market would experience tighter pricing, the impact on the Malaysian market would be minimal because the region still has ample liquidity. Two factors that would help curb the subprime effect would be rating and investor education. Rating would help investors value the risks of an issuance while the issuer has the obligation to explain to investors how their papers would be different from the subprime notes.

A question from the audience regarding the impact of investors’ familiarity on distribution wrapped up the session. Khazanah and Cagamas agreed that investor familiarity would help increase and widen distribution. “For Khazanah’s first issuance, only 27% was distributed to Islamic investors because some of them were not familiar with equity-linked products and failed to price the equity portion in the structure correctly. However, during the second issuance, half of the issuance was subscribed by Islamic investors and the issuance itself was 13 times oversubscribed. Thus investor familiarity has a direct impact on distribution,” Izani explained.