Jul 10 2011

Malaysia remains largest issuer of domestic sukuk

LABUAN, Malaysia - Malaysia remains the largest issuer of domestic sukuk at 72 percent by value with the balance split between a number of other issuers such as Sudan, Saudi Arabia, the United Arab Emirates, Bahrain, Brunei, Pakistan and Indonesia, Bernama news agency reported Friday.

However, for the short-term sukuk market (maturity of one year or less), Sudan is the leader in domestic sukuk issuances, followed by Bahrain, Brunei and Malaysia.

Chairman and Chief Executive Officer of the International Islamic Financial Market ( IIFM ) Ijlal Ahmad Alvi said as far as the domestic sukuk market is concerned, Malaysia has the lion's share in terms of both volume and value.

He said the appetite for short-term sukuk is much greater than that for the longer tenure as witnessed by most issuers.

"The trend toward issuing shorter tenure sukuk is slowly increasing and is again driven by sovereign issuers through central banks," he said at the launch of the second edition of the International Islamic Financial Market ( IIFM ) Sukuk Report in Labuan.

Ijlal Ahmad said Malaysian corporate issuers are also active and have provided diversity to the local market plus depth, which is required for a developed capital market.

Bahrain has been the most active market within the Gulf Cooperation Council (GCC) region, and is a regular issuer of short-term Sukuk Al Salam and Sukuk Al Ijarah offerings, which are always oversubscribed. "It is the first government in the GCC to use sukuk as one of the primary tools for raising finance," he said.

He also said that the future outlook for short-term paper is encouraging and the Saudi Bin Laden Group has shown the way for other corporate issuers from the GCC region to enter the short end of the market.

"Moreover, it is expected that Bahrain, Brunei, Sudan plus several new entrants, will contribute to the development of the short end of the market," he added.

Meanwhile, according to the second edition of the International Islamic Financial Market ( IIFM ) Sukuk Report, Khazanah Nasional Berhad (Danga Capital Berhad), has been quite in the international sukuk market.

The Khazanah Singapore Dollar (SGD) sukuk comprises two tranches, a five-year tranche of S$600 million and a 10-year tranche of S$900 million due in 2020.

This sukuk, equivalent to a massive $1.1 billion, achieved several milestones.

Among them are being both the largest and longest term sukuk issuance in Singapore, the largest Singapore dollar issuance by a foreign issuer in the city state and the first Singapore dollar sukuk issuance out of the Malaysia International Islamic Financial Centre.

The sukuk have an indicative profit rates of 2.615 percent per annum for the five-year tranche and 3.725 percent for the 10-year tranche.

Meanwhile, Sipchem announced the successful closing of its first publicly listed Sukuk on June 29, 2011 of SR1,800 million ($480 million) which was upsized from the initial base case of SR1,500 million due to the strong demand shown by interested investors. The Sukuk provides Sipchem an alternate source to funding its projects using a Shariah-compliant Mudaraba structure.

"We target raising SR1.5 billion from the issue and the value may rise to SR2 billion based on our need and on the offers (from investors)," Ahmad Abdul Aziz Al Ohali, Chief Executive Officer, Managing Director, Executive Member of the Board, Sipchem said earlier.

© The Saudi Gazette 2011

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