The territory, which granted sukuk equal tax treatment last week, needs to have state-related agencies offer syariah notes if it wants to become a regional hub, said Tengku Datuk Zafrul Tengku Abdul Aziz, chief executive officer at Maybank Kim Eng Holdings Ltd, in Kuala Lumpur on Wednesday.
The city, which first identified developing Islamic finance as a priority in 2007, amended regulations to tap a forecast US$950 billion (RM3.03 trillion) of international demand for sukuk by 2017, more than triple the current amount of the debt.
Singapore has S$1.83 billion (RM4.62 billion) of syariah-compliant bonds outstanding after changing its tax laws in 2006, less than two per cent of the amount in industry pioneer Malaysia, central bank data show.
"I don't think this means the floodgates are going to open and suddenly we're going to see a huge inpouring of sukuk in Hong Kong," Davide Barzilai, a partner specializing in Islamic finance at law firm Norton Rose Fulbright LLP, said from Hong Kong on Monday. "We are not the Middle East and we're not Malaysia, so there isn't a local market that's been requiring this."
The city has the world's sixth-biggest foreign-exchange market with a daily turnover of about US$237.6 billion, according to the Bank of International Settlements.
The Hong Kong Stock Exchange is Asia's second largest, after Tokyo, and was the most active for initial public offerings in 2009, 2010 and 2011, a government statement shows.
"This tax legislation removes a key hurdle in the development of the sukuk market in Hong Kong," said Ahsan Ali, head of Islamic bond origination at Standard Chartered Plc in Dubai. The city can "act as a gateway to the Greater China region for syariah-compliant investors," he said on Monday.
Malaysian companies have tapped Chinese investors, with sovereign-wealth fund Khazanah Nasional Bhd selling 500 million yuan (RM260.6 million) of Islamic Dim Sum bonds in the Malaysian offshore financial centre of Labuan in October 2011.
Investors bid for seven times the 500 million yuan of sukuk offered by Axiata Group Bhd in September, prompting the firm to double the sale to one billion yuan, the largest-ever offer of Chinese- currency syariah-compliant notes.
"Hong Kong will open the window to China," AmInvestment Bank's Mohd Effendi said. "They need to build more infrastructure, such as guidelines and products."