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Barclays to add Malaysian sukuk to flagship bond index

[LONDON] Barclays Plc's index business will include Islamic bonds issued by the Malaysian government in its global fixed income index, doubling the market value of ringgit-denominated components in the benchmark.

It will be the first time that sukuk are included in the Barclays Global Aggregate Index, a flagship measure of global investment grade debt from 24 local currency markets, potentially widening the appeal of Islamic instruments among global debt investors.

The move will increase the market value weight of ringgit-denominated bonds in the index to 0.37 per cent, from 0.19 per cent as of Jan 31, Barclays said in written responses to Reuters questions.

The sukuk will be included in the index by the end of March, and will also become constituents of Barclays' Asia-Pacific and emerging markets local currency government indexes.

Conventional Malaysian government bonds have been eligible for inclusion in the Global Aggregate Index since 2006.

Sukuk issued by Malaysian corporations are not being considered for inclusion and there are no plans to include sukuk from other governments, the company said, owing in part to the issue of limited secondary market liquidity.

Other factors which Barclays looks at when assessing instruments' potential inclusion in its indexes include market size, settlement and clearing, capital controls and tax regimes, and accessibility for foreign investors.

Indonesia's sovereign sukuk are already eligible for Barclays' emerging markets local currency government bond index, the company said.