"There should be no doubt about our determination to establish a platform for Islamic finance in Hong Kong," Hong Kong Monetary Authority (HKMA) Deputy Chief Eddie Yue told a forum on Islamic finance, reported Bernama news agency.

"Our priority is to push ahead with the development of an Islamic bond market," he explained.

Sukuk, which conform to Islam's prohibition of receiving or paying interest, typically work as profit-sharing vehicles.

Companies that issue Islamic bonds make payments to investors using profits from the underlying business, instead of paying interest.

But money can not be invested in alcohol, gambling, pornography, tobacco, weapons or pork.

Yue insisted time is ripe for Hong Kong to get a foothold in the globally-thriving Islamic banking industry.

"We believe that this is a good time to do the groundwork of installing the necessary legal, taxation and market infrastructure," told the one-day forum.

The Sukuk market has reached $111.9 billion in the eight years to 2008 and a further $69 billion is expected to be issued in 2008/2009, the International Islamic Financial Market said.

Western countries represent 50 percent of the Sukuk market, the IIFM estimated.

Competition

Officials believe venturing into the booming Islamic finance industry will help Kong Hong, long seen as Asian financial hub, to lure more investors.

"There are opportunities for us to extend our reach to potential Islamic investors and financiers in the Middle East and Asia," says Yue.

"The addition of Islamic finance as a new asset class in our financial system will add value to Hong Kong as a thriving financial centre and a leading financial services hub in Asia."

Hong Kong will be completing with neighboring Singapore which is also planning to launch its sukuk issuance facility early next year to promote the growth of Islamic finance.

Singapore Central Bank's Managing Director Heng Swee Keat said Monday that a number of financial institutions have already expressed interest in the sukuk.

Both countries, however, will face a major challenge from neighboring Malaysia, already a hub for Islamic banking and finance.

Islamic finance, already one of the fastest growing sectors in the global financial industry, is estimated to be worth US$1 trillion.