Financial growth in Hong Kong

Financial growth in Hong Kong

After all the uncertainty in the financial markets following the 2009 global slump, matters seems to have stabilized for the former UK protectorate. Following on from a key discussion paper produced by its legislative council, Hong Kong's government may well present a bill to its lawmakers that would allow it to raise finance through Islamic bonds. It is anticipated this could be presented as early as the first financial quarter of 2014.

The reason Islamic bonds are considered to be worth serious consideration, from an economical point of view, is due to the fluctuating trends in global markets. The middle east is proving to be an increasingly lucrative region of the world, with a combination of oil wealth and openness towards international markets proving to be irresistible to investors. The competition to secure a place in this trading region is becoming ever more competitive. Financial centres devoted to Islamic business enterprises are opening branches throughout the middle east, stretching their operations as far as the Pacific rim.

The Hong Kong government's bill will grant them permission to issue sukuk, as part of its existing bond programme. Under this scheme, 107.5 million Hong Kong dollars-worth of bonds have been issued (with 90 billion outstanding as of November 15th). Amongst the various diktats outlined in the paper is a call for amendments to existing legislation that allows the use of 'special purpose vehicles', in other words, investment certificates that follow religious guidelines. Included under this heading are areas such as bans on gambling.

The notion of a sukuk for Hong Kong is far from a recent concept. In fact, the idea was broached back in 2008, when its airport authority tabled the possibility of selling a sukuk of up to $1 billion. So far this has never progressed as far as a sale.

The next step is for Hong Kong's government to establish a working group to consider the way forward. They will be focusing on the practicalities of evolving from the present finance regime, which is self-regulating, to a new version administered by an Independent Insurance Authority.