(Sukuk.net - Arab News) Malaysia is confident that the local Sukuk market will bounce back over the next few weeks and hopefully lead a green shoots revival in the regional and global Sukuk market.

A senior government official stressed that the market would firm up following the RM60 billion economic stimulus package announced on March 10 by Finance Minister Mohamed Najib Razak, which includes a RM15 billion fiscal injection in the form of guarantees to the financial sector.

"Appetite for Sukuk has not dampened. We have a number of corporates lining up to issue Islamic securities. But they were forced to delay the issuances in 2008 and first quarter 2009 because it was too costly to issue Sukuk because the pricing was high. But with access to government guarantees, we are confident there will be an improvement in pricing and the market will soon take off again," said the official.

Islamic bankers such as Badlishah Abdul Ghani, CEO, CIMB Islamic Bank, and Salman Younis, CEO, Kuwait Finance House, believe that local currency issuances will be the trend in the near future as issuers move away from US dollar issues, due to the scarcity of the greenback in global markets and therefore the upward pressure on pricing. Sukuk issuances in Malaysia totaled about RM21 billion in 2008; and are expected to reach RM14.5 billion over the next few months.

Last week, the Malaysian National Housing Finance Corporation (Cagamas), sold RM915 million of Islamic bonds which were oversubscribed 2.2 times. Cagamas alone plans to sell RM14 billion of bonds in 2009, of which about half could be Islamic bonds.

The Islamic Development Bank (IDB), in February announced that it was planning to issue local currency Sukuk in Singapore, Indonesia, Kazakhstan and possibly Hong Kong. "Local currency issuances by the IDB," stresses Ghani, "is definitely a good thing. It will help create benchmarks when the market comes back. It helps generate activities where there is no activity. But the IDB could also play a much bigger role."

Abdul Ghani told Arab News that the market has welcomed the RM60 billion economic stimulus package by the Malaysian government, especially the RM15 billion fiscal injection which provides guarantees for issuers in the debt markets both conventional and Islamic.