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LSE enhances its sukuk listing prowess

By By MUSHTAK PARKER The UK Treasury may have reiterated that a sovereign debut benchmark Sukuk is not currently prudent because it would not give "value-for-money" to UK taxpayers, but one UK entity of global repute that is enhancing its Islamic finance business is the London Stock Exchange (LSE).

In January 2012, the LSE in fact attracted the listing of another two sukuk bringing the total number of sukuk which have listed on the exchange to 42 and the total money raised to over $23.75 billion.

The two latest issuances to list on the LSE are EIB Sukuk Company Ltd. issue of 5-Year $500 million Islamic Trust Certificates on behalf of Emirates Islamic Bank ( EIB ). This was EIB 's first sukuk since the onset of the global financial crisis in 2007 and was priced at MS (Mid Swaps) plus 350 basis points, with a profit rate of 4.718 per cent per annum. The other listing is the FGB Sukuk Company Limited 5-Year $500 million Islamic Trust Certificates on behalf of Abu Dhabi-based First Gulf Bank ( FGB ). This issuance was priced at MS plus 287.5 basis points and giving a fixed profit rate of 4.046 percent per annum.

There are four major sukuk listing domiciles -- London (London Stock Exchange); Kuala Lumpur (Bursa Malaysia); Dubai (Nasdaq Dubai); and Luxembourg (Luxembourg Stock Exchange). Over the last few years with the rapid growth of the Islamic finance industry and especially the sukuk market, there has been an undeclared listings war between the above domiciles. The LSE underpinned by the City's pre-eminence as arguably the major international financial center in the world and supported by successive British government's support of London as a hub for Islamic finance, trade and investment, seems to be in the ascendancy.

The LSE's position is further strengthened by the fact that other domiciles for instance Luxembourg are primary listing domiciles with no trading. Similarly, the fact that most sukuk transactions (at least the major ones) are governed by English law has also enhanced the reputation of the City and by association the LSE.

Saudi Arabia's stock exchange is also emerging as a sukuk listing institution, but this is only for local publicly listed issuances. Trading on the Tadawul of sukuk is also meager. In the first 21 days of January 2012, for instance, there were only two trades of the eight or so listed sukuk on Tadawul amounting to a mere SR2.828 million and SR38.46 million respectively.

The London Stock Exchange on the other hand is a key global venue for the issuance of sukuk. According to the LSE, it offers the choice of two routes to market - the Main Market or the Professional Securities Market. The Main Market is the exchange's flagship international market for established companies and offers access to deep pools of capital and the benefit of a high profile launch to market. The Professional Securities Market, which is exchange-regulated, offers the benefits of listing with more flexible regulatory requirements. It allows the admission of debt securities and sukuk without the requirement for a full prospectus as only listing particulars are required and the disclosure requirements are tailored to wholesale needs as they can be governed by domestic GAAP rather than IFRS accounting conventions.

"In addition to the prestige of admitting securities to trading on a truly international and globally respected exchange, allowing companies to raise their profile with investors worldwide and access a deep pool of capital, London offers the benefit of competitive admission and listing costs as London is the only major listing venue which does not charge an annual fee to issuers," explained the exchange in a statement.

© Arab News 2012