Sabana – BT

Expect more Syariah-compliant Reits in 2011

HSBC Amanah M’sia CEO also expects an increase in global sukuk issuance

More Syariah-compliant real estate investment trusts (Reits) will come to market in Asia in early 2011 as cross-regional Islamic investors increasingly embrace the product, HSBC Amanah Malaysia’s new head said.

Singapore’s first Syariah-compliant Reit, Sabana Reit, listed on Friday, having drawn a mixture of both conventional and Islamic investors, a quarter of them from the Middle East, chief executive Rafe Haneef told Reuters on Friday.

‘The take-up (among Gulf investors) for future Islamic Reits will be a lot greater than that,’ said Mr Haneef, who is also managing director of global markets for HSBC Amanah.

‘At the moment there is no timeline for when other issuers will come out with Islamic Reits, but I would expect more in the first or second quarter of next year,’ he said.

HSBC Amanah was exploring other Islamic Reit opportunities in Malaysia and Singapore, Mr Haneef said, noting it was financial adviser for the Sabana Reit initial public offering (IPO).

Sabana Reit, the world’s largest Syariah-compliant property trust, sold 508 million units at $1.05 each in its IPO this week. The IPO was 2.5-times subscribed. Sabana Reit’s shares closed at $1.02 on Friday on the Singapore stock market, after being weighed down by jittery market sentiment.

On Nov 23, Dubai Islamic Bank launched the emirate’s first Syariah- compliant Reit in a joint venture with French property firm Eiffel Management, a move executives said would help fuel growth in the country’s battered real estate sector.

Mr Haneef said Syariah-compliant Reits ensured higher-quality investments because the screening process looked at both the underlying asset and the usage of the asset, and does not allow for speculative or risky investments.

Mr Haneef, who was appointed CEO this week, said HSBC Amanah Malaysia continues to see a healthy global pipeline for Islamic finance products – including Islamic bonds, or sukuk – as investors seek to tap the growing US$1 trillion market.

He expects an increase in global sukuk issuance in the first quarter of 2011, with Middle East investors potentially looking to issue sukuk denominated in the Malaysia ringgit to satisfy interest among corporates and sovereign-linked entities.

Sources said Dubai plans to issue about US$1.5 billion worth of sovereign sukuk in Malaysia as the Gulf Arab emirate looks to tap the world’s largest Islamic bond market to diversify its funding avenues.

‘We were the first to bring a Middle East credit to the Malaysia ringgit sukuk,’ Mr Haneef said. ‘Currently, there’s a price advantage to tapping the Malaysian ringgit and swapping it back to dollar.’ – Reuters