$47 bln Sukuk issued during first half: KFH

KFH Researches monthly report about the developments in the global sukuk market revealed that the issuance of sukuk in global markets increased during the aforementioned period by 34.7%. The report noted that the value of sukuk issued during the First Half is USD 47 billion, which is more than last year’s record USD 45 billion — Editor

Sukuk issuance in June jumped by 34.7% m-o-m bringing the first half total issuance to just over USD47bln, already more than the record USD45.1bln seen in 2010. The flurry of sukuk during June was topped off by a USD2bln issuance by the Government of Malaysia to make the month the second highest in issuance to date. The Malaysian government’s five and ten year sukuk Wakalah was oversubscribed 4.5x, attracting an excess of USD9bln. The issuance was fully distributed to 320 global investors throughout Europe (14%), the US (8%), the Middle East (29%) and Asia (22%) with the remaining 27% being distributed in Malaysia. The issuance marks the first global US dollar sovereign sukuk for 2011, the first US dollar sovereign using the Wakalah principle, the largest US dollar sovereign dual tranche sukuk and the lowest absolute yields achieved by an Asian sovereign for a new US dollar issue (2.991% five-year and 4.646% ten-year).

June was a Malaysia centric month with all but three issues domiciled in the country. A further RM3bln (USD1bln) was issued by Sarawak Energy Berhad, a Malaysian state-owned utilities company, as the first issuance of a RM15bln (USD5bln) programme. The four tranche sukuk Musharakah has maturities of five, seven, ten and fifteen years
Sukuk issuances for the month were led by sovereign issuers who accounted for 49.2% of the value, followed by corporates 27% and government related entities 23.7%.
On the currency front, sukuk issued during June were largely denominated in Malaysian Ringgit, accounting for almost three quarters of issuances. The global sovereign sukuk by Malaysia meant that US dollar sukuk accounted for 25% of the total for the month. Meanwhile the rest of the sukuk were issued in Bahraini dinar.
A total of 81 sukuk were issued in June vs. 60 sukuk in May and 53 in April. Among these, a huge 62 were issued by the corporate sector totalling USD2,167.7mln (May: USD1,626.9mln, +33.2%) while there were 13 sovereign issuances totalling USD3.95bln (May: USD2.95bln, +33.8%).
The only international sukuk issued during June was the sovereign Malaysian sukuk. All corporate sukuk were placed in Malaysia.

Aldar Funding Sukuk
Commentary: The yield of Aldar Funding sukuk spiked in June from as low as 2.798% to 3.722% by the end of the month as Moody’s downgraded the company’s credit rating to B2 from Ba3. Moody’s cut Abu Dhabi’s Aldar Properties’ credit ratings by two notches and said it was no longer classifying the firm as a government-related issuer, citing uncertainty over future government support. Moody’s also downgraded Aldar’s USD1.02bln sukuk due in 2013 to B1.
Dubai DOF Sukuk
Commentary: Yields on Dubai’s USD1.25bln sukuk due in 2014 fell to the lowest level since their sale in Oct 09 to 4.573% this month. The yield climbed to 4.795 by the end of the month as Dubai set up a USD5bln bond programme to help bridge its budget deficit and fund investments. Dubai, which has USD16bln of publicly held debt maturing later this year, is posting the region’s best returns as investors turn to the tourism hub to avert political turmoil sweeping the Arab world.

TDIC Sukuk
Commentary: The Tourism Development and Investment Company (TDIC) sukuk yield climbed in June to 2.934% from 2.638% at the start of the month. TDIC is to push back construction of several planned hotels at Saadiyat Island, Abu Dhabi, in an effort to make the multibillion-dollar project commercially viable. The company is also looking at selling USD1bln bonds under its existing USD3bln programme.
QIB Sukuk Funding Ltd
Commentary: The Qatar Islamic Bank sukuk yield dropped slightly during June finishing the month at 3.054%. Qatar Islamic Bank has pulled out of the bidding for a majority stake in Indonesian Islamic lender PT Bank Muamalat. QIB was seen as a front runner for the stake in Indonesia’s second biggest Islamic bank in a deal that may be worth USD300mln.

By: Kuwait Finance House

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