Malaysia’s Liberalisation of Finance sector to boost its Sukuk leadership

The announcement was made by Prime Minister Najib Razak who said the decision would support the strengthening of Malaysia’s capital market and act as a catalyst sustainable long-term growth.

In the last two decades, the RM1 trillion Malaysian bond market – the largest in ASEAN – has been charting impressive growth in terms of market size, depth and breadth.

”Discerning investors will be the key driver of credit ratings in the future, and this will be important for the continuity of pricing transparency. In advanced bond markets, investors view ratings as being essential to their investment decisions,” remarks Foo Su Yin, CEO of RAM Ratings. ”RAM will continue pioneering credit-rating approaches to support the bond and sukuk markets,” adds Foo.

To subject credit ratings to open competition, Malaysia will remove mandatory requirement for bonds, and allow full foreign ownership by Jan. 1, 2017.

At present, two agencies in Malaysia oversee credit ratings in the domestic bond market, both conventional and Islamic. These agencies are co-owned by various local and foreign financial institutions, with foreign participation capped at below 10%.

The last major liberalization in the Malaysian financial sector was in 2009 when limits in foreign shareholdings in Islamic financial institutions were raised.