Page 31 - Introduction To Investment Management

iii. Municipal Bond

Bonds are issued by state or local government. Some of the bonds offer tax
exemption on revenue and profits on investments. Other features of the bond are like

treasury bonds as we discussed earlier.

iv. Convertible Bond
Convertible Bond is the only bond that allows the issuer to change the status of

the bond. Thus, investors who previously bought the bond will become a shareholder of
the company and entitled to receive an annual dividend.

B. Sukuk

Sukuk generally refers to the Islamic equivalent of bonds. However, as opposed
to conventional bonds, which simply represent ownership of a debt, Sukuk grants the

investor a share of an asset, along with the commensurate cash flows and risk upon
maturity. As such, Sukuk securities adhere to Syari’ah principles, which prohibit the

charging or payment of interest. The emergence of Sukuk has been one of the most

significant developments in Islamic capital markets in recent years. Sukuk issuance has
proven its resilience during recent periods of instability in global capital markets.
According to Islamic Development Bank (2017), Sukuk issuance increased from US$ 14.9

billion in 2008 to US$ 23.3 billion in 2009, with Asia showing strength. Even so, the Sukuk

market is still a niche one, with huge potential for growth. The Sukuk growth rate is
currently 10-15% in global financial markets.

Table 2.2 below, shows the dissimilarities between Sukuk (Government

Investment Issues - GII) and bond (Malaysian Government Securities-cMGS) in Malaysian
capital market as published by Bank Negara Malaysia.

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