18 July 2012
The first half of 2012 was a remarkable start to the year with at least USD 68 billion worth of sukuk issued globally, a 36% increase from the same period last year. Saudi Arabia was the star of the show with a benchmark sovereign sukuk, while Malaysia sustained its dominance.

All indicators point to another record year. Zawya estimates at least USD  100 billion of sukuk will be sold 2012.

Malaysia issued more than 70% of sukuk in the first six months of 2012 - which is no surprise - followed by Saudi Arabia with 13%. The kingdom made a record issuance of sukuk for the first time, beating the UAE and topping the GCC.

Issuance in June was exceptionally high, probably due to the approach of the summer holidays and the holy month of Ramadan. According to Zawya's quarterly bulletin for Q2 2012, the first half of 2012 witnessed the issuance of USD 68 billion in sukuk globally.


Source: Zawya Sukuk Monitor

Malaysia continued to dominate with generous issues to fund infrastructure development. After the huge issues from Projek Lebuhraya Utara-SelatanBerhad (PLUS) in January, and besides the regular issues from Bank Negara Malaysia, Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) closed a MYR 3.5 billion sukuk program in the domestic market.

Just as June was about to end, Malaysia sold tranches under an innovative Wakala MYR 3 billion program, issued by Johor Corporation, a state investment firm. Khazanah Nasional came back to the market with a successful issue of a seven-year benchmark exchangeable sukuk of USD 357.8 million via Pulai Capital. The offer received an overwhelming demand from investors underlining the market's strong confidence in Khazanah's credit-worthiness.

The GCC region witnessed the sale of USD 13.7 billion of Islamic bonds in the first half of 2012, according to data compiled by the Zawya  Sukuk Monitor, with a significant comeback for neighboring Yemen to the sukuk market.

From the UAE, Emirates Islamic Bank, the Shariah-compliant sister of Emirates NBD, sold a USD 500 million third tranche of its USD 1 billion program, which came on the heels of a previous similar issue in January. The UAE, through its corporate and sovereign issuers, sold USD 4.3 billion of sukuk.  

While Dubai Financial Services Authority (DFSA) announced the delisting of the AED 7.5 billion JAFZ sukuk, Dubai Financial Market (DFM) announced the listing of two sukuk of the Government of Dubai with a combined value of USD 1.25 billion followed by the JAFZ USD 500 million international Wakala sukuk.

One of the interesting issues in the UAE in the first half of 2012 was the cross-border sukuk tranche issued by Abu Dhabi National Energy Company, or Taqa, under a MYR 3.5 billion program reflecting the increasing interest of GCC firms to tap the Malaysian market.

However, Saudi Arabia secured top ranking in the GCC with USD 8.8 billion. The General Authority of Civil Aviation's (GACA) USD 4 billion sukuk was the first sovereign to come from the kingdom, followed by Tasnee's first privately placed Islamic bond. Saudi banks increasingly sold sukuk through Saudi British Bank followed by Saudi Fransi marketing a benchmark sukuk in the international markets. 

In mid-June, Islamic Development Bank (IDB) issued a tranche of its USD 6.5 billion program followed by a SAR 650 million Saudi Olayan sukuk sold in the domestic market. The IDB has issued six sukuk in the international markets between 2003 and 2012 totaling USD 3.8 billion. Most of the issues were oversubscribed.



The trend is expected to continue with many issuers revealing plans to tap the Islamic bond market, as the kingdom's entities - both governmental and corporate - seek various means to raise capital whether through debt or equity to finance their expansion plans, projects and to restructure their debts.

Major announcements came from the Development Bank of Kazakhstan which received approval from the Kazakhstan and Malaysian regulatory authorities to issue its sukuk in the Malaysian market, part of a MYR 1.5 billion program.

Qatar hired banks to advise on the announced sovereign sukuk issue. The governments of South Africa and Turkey, usually conventional borrowers, will tap the market in the coming months. Other global sukuk announcements came from Malaysia, which is expected to issue up to MYR 2 billion via First Resources and a quasi-sovereign MYR 8 billion program through Dana Infra Nasional.

Abir Atamech is an analyst at Zawya. She can be reached at abir.atamech@zawya.com

Zawya 2012