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Issuances total $9.07 billion in February; Malaysia top issuer 3.1 percent drop from previous year

 KFH-Research, a subsidiary of Kuwait Finance House Group, KFH-Group issued a report stated that he global sukuk market experienced a slight fall in volume during the month of February 2014 with total sukuk issuances amounting to $9.07bln, which was 3.1% lower than the $9.36bln issuances in February last year. February’s drop reflects a generally slow start for the sukuk market in 2014. The decline in issuances are led by Malaysia which issued a total of 58 corporate sukuks (worth $2.6bln) and 33 sovereign and government-related entity sukuks (worth $9.9bln) in two months ended February this year, which is lower than the 99 corporate ($5.1bln) and 37 sovereign and government-related entity sukuks ($12.6bln) it issued during the same period last year.

Meanwhile, issuances from the non-Malaysian jurisdictions remain at a lacklustre although the statistics are a bit improved for 2014. Non-Malaysian jurisdictions issued a total 40 sovereign and government-related entity sukuks ($5.77bln) in 2M14, an increased number compared to the 21 issues ($3.87bln) last year for the same period. In the corporate segment, non-Malaysian jurisdictions issued 4 sukuks ($1.77bln) in 2M14 as compared to the 2 sukuks ($0.4bln) in 2M13. Collectively the two months ended Feb-14 resulted in total issuances of $19.92bln, which is 9.66% lower than the $22.05bln volume issued for the same period last year.

Nonetheless, there are a few milestones in 2014 to date. Maldives debuted in the sukuk market in January with a 10-year corporate real estate sukuk worth $3.29mln. In addition, the GCC corporate sukuks market kick started with two landmark corporate sukuk issuances: Saudi Arabia witnessed the issuance by National Commercial Bank (NCB) worth SAR5bln ($d1.33bln) which marks the largest issuance by a financial institution in Saudi Arabia and the largest ever subordinated debt instrument issued by a financial institution in the MENA region. 
Meanwhile, Dubai Investments Park (DIP) in United Arab Emirates tapped the sukuk market with a debut $300mln sukuk, representing the GCC’s first $ sukuk issuance this year. The DIP issue received tremendous response and was oversubscribed by 13 times which represents one of the highest levels of oversubscription achieved by a corporate issuer in the international sukuk and conventional markets from the region. 
On the sovereign and quasi-sovereign sector, during the two months of 2014, the multilateral entity, International Islamic Liquidity Management Corporation (IILM) also issued its 3rd and 4th tranches of its short term sukuk programme worth $860mln and $490mln respectively taking its sukuk outstanding portfolio to $1.35bln. Meanwhile, the Turkish Treasury also returned to the sukuk market with a TRY1.33bln sovereign issuance and its total sukuk outstanding almost numbers $6bln. Of late, the Islamic Development Bank (IDB) has recently priced its largest transaction to date, a 5-year $1.5bln sukuk on 27th February, although the proceeds will be raised on 6th March and hence the issue would be reflected in that month.
Analysing by country of sukuk origination, Malaysia continues to account for the largest share of the sukuk market with a $6.62bln volume or 73% of the issuance total in the month of February. Other notable jurisdictions include Saudi Arabia with a 14.3% share, spearheaded by the sole $1.5bln sukuk issuance by NCB, Turkey with a 6.8% share spurred by the TRY1.33bln sovereign issuance, and finally the UAE with a 3.3% share on account of the $300mln DIP sukuk. Other issuances included regular local currency salam sukuk issuances by the Central Banks of Bahrain and Gambia worth $141.1mln and $3.9mln respectively. The Indonesian government also issued a 6-month sovereign sukuk worth $83.7mln in IDR.
Sovereign issuers made up 63.6% of the primary market in February, while corporates accounted for 28.1% and government related entities took the remaining 8.3%. The figures stand in contract to the previous month of January where corporates had a comparatively smaller share of 15.9% while sovereigns and government related entities had larger shares of 72.2% and 11.9% respectively. By currency, the Malaysian ringgit accounted for 64% of issuances during the month, followed by the Saudi Riyals (14%) and the US Dollar (12%).
A total of 50 sukuks were issued in February vs. 85 sukuk in January. Among these, 16 were issued by the corporate sector totalling $2.54bln (January: 46, $1.72bln), 31 by sovereigns totalling $5.77bln (January: 37, $7.84bln) and 3 by government related entities worth $756mln (January: 2, $1.93bln).
In summary, February saw a rebound in the corporate sukuk issuances accounting for $2.54bln or 28.1% of the total issue (January: $1.72bln, 15.9%) led by landmark issuances by NCB and DIP in the GCC. However, the overall volume in February this year was lower as compared to the $9.36bln issuances in February last year.
Collectively the two months ended Feb-14 resulted in total issuances of $19.92bln, which is 9.66% lower than the $22.05bln volume issued for the same period last year. The decline in volume was on account of a drop in Malaysian sukuk issuances of all types this year with a total 91 issuances worth $12.5bln in 2M14, as compared to 136 issuances worth $17.8bln in 2M13. Comparatively, non-Malaysian jurisdictions had an improve volume with a total of 44 issuances worth $7.4bln in 2M14 as compared to 23 issuances worth $4.3bln in 2M13. However, with a healthy and diverse pipeline in place for 2014, which includes debut issuances from the likes of the United Kingdom, Luxembourg, South Africa, Mauritania, Tunisia and Senegal, the sukuk primary market is expected to gain momentum in the coming months.

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