Hong Kong firms may sell Islamic bonds in Q4 -paper

(Reuters,May 19 - Hong Kong borrowers may issue sukuk, or Islamic bonds, in the fourth quarter of this year if credit market conditions improve, a newspaper said on Monday, quoting the head of a local capital market body. Frank Kwong See-wah, chairman of the Hong Kong Capital Market Association, said many companies in the territory were considering selling sukuk to tap a new pool of investors, the South China Morning Post reported.

Sukuk are financial instruments which adhere to the Islamic sharia principals under which interest payment is banned and the financing of certain business activities is prohibited. They are typically based on physical assets that pay rent. Kwong did not name any potential issuers.

Several countries in the region are keen to develop an Islamic finance market to attract investors from the booming Gulf economies.

The Hong Kong Mortgage Corporation, Airport Authority Hong Kong and MTR Corporation Ltd (0066.HK: Quote, Profile, Research) could be among the first to issue sukuk, the newspaper said, quoting unnamed capital market sources.

Last year, the Hong Kong Monetary Authority carried out a study jointly with the Treasury Market Association on developing an Islamic financing platform in Hong Kong.

"The findings suggest that Hong Kong's existing legal and regulatory infrastructure can readily support the development of an Islamic bond market," the HKMA said in its annual report.

"However, Hong Kong's tax laws need to be changed or clarified to provide a level playing field for the issuance of Islamic bonds in Hong Kong."

The newspaper said many Islamic investors were interested in investing in mainland China, and Hong Kong would benefit from this demand.