IslamicFinance.de

The Indonesian government is considering cutting the levy to zero for all local-currency sovereign bonds from 15% for domestic investors and 20% for international ones. According to Abas A. Jalil, CEO of Amanah Capital Group, the zero tax will definitely encourage more participation by government funds in the Indonesian sukuk market. The proposal aims to revive Islamic banking after the industry shrank to 3.5% of total financial assets in March, from 5% a year earlier. Only one Indonesian company has issued rupiah sukuk in 2016 for the equivalent of $7.3 mn compared with $5.9 bn worth of ringgit sales in Malaysia, the biggest Shariah-compliant debt market.

Sharjah Islamic Bank (SIB) has successfully repaid a $400 million sukuk. The sukuk had been raised in May 2011 under challenging market circumstances. The funds raised under the sukuk were used for general corporate purposes and business expansion of SIB. The bank currently has two sukuks of $500 million outstanding which are set to mature in 2018 and 2020 respectively.

DP World has raised $1.2 billion in a new seven-year sukuk which is set to be listed on Nasdaq Dubai. The issue received strong investor interest and was 2x oversubscribed receiving more than $2bn in bids. The new sukuk is priced at a fixed coupon rate of 3.91% maturing in 2023, replacing over $1.1bn of the 2017 6.25% coupon sukuk. Sultan Ahmed bin Sulayem, Group Chairman and CEO of DP World said Nasdaq Dubai gives this new listing global visibility to position Dubai as the capital of the Islamic economy globally.

Turkish participation bank Kuveyt Turk has raised 300 million lira ($101.5 million) of Islamic bonds, and plans to regularly use public sales in the future. The 6-month deal is the largest local currency sukuk issued by Kuveyt Turk. The bank opted for a public sale to further widen its funding sources, in contrast to most other sukuk deals which are sold via private placements. Last week, the Turkish treasury mandated banks for a sovereign sukuk deal in the international markets. First, Turkiye Finans Katilim Bankasi applied to raise as much as 17 million euros via sukuk, followed by Aktif Bank who has also applied to raise up to 100 million lira via sukuk.

Kuwait Finance House Turkey has realized a sukuk issuance of 300 million TL with tenure of 179 days, exceeding its own previous record breaking sukuk issuance of TL 200 million on Nov 13, 2015. According to CEO Ufuk Uyan the bank will continue similar public offerings in the future. The first lease yield shall be made on Aug 11, 2016, while the second on Nov 8, 2016 at the end of the maturity, together with principal sums. So far, KFH-Turkey has issued lease certificates of a total of TL 7,2 billion in domestic and overseas markets.

Dentons advised #Kuwait's Boubyan Bank on its issuance of $250 million Perpetual Tier one Capital Certificates, which completed on 16 May 2016. The transaction represents the world's first public fully Basel III-compliant Tier one Sukuk, while also being the first ever public Sukuk from a Kuwaiti bank, and the first public Sukuk out of Kuwait since 2007. Standard Chartered Bank, HSBC and Boubyan Capital acted as joint global co-ordinators, together with Emirates NBD Capital, Dubai Islamic Bank, KFH Capital and National Bank of Kuwait as joint lead managers on the issuance of the Capital Certificates. Abu Dhabi Islamic Bank, Ajman Bank and Noor Bank acted as co-managers.

The recovery of the sukuk market is expected to continue as the threat of a steep increase in US interest rates is quickly diminishing. Based on the view of lower interest rates for a longer period, CEO of Maybank Islamic Asset Management, Ahmad Najib Nazlan has a cautiously optimistic outlook on the sukuk market. Following a renewed positive sentiment, Indonesia’s Financial Services Authority (OJK) recently called on state-owned firms to issue more Islamic bonds. In Malaysia the Employees Provident Fund (EPF) is also calling on the government to increase the supply of ringgit sukuk as it gears up for the launch of its shariah-compliant option for contributors in January 2017.

RAM Ratings has assigned an A3/Stable rating to Bank Muamalat Malaysia's proposed Up to MYR 1 billion Subordinated Sukuk Murabahahh Programme. The proposed Sukuk is Basel III-compliant and will qualify as tier-2 capital. The bank aims to continue concentrating on personal and corporate financing this year while de-emphasising its home-financing portfolio, given the competitive mortgage segment. Bank Muamalat has made significant strides in cost savings, which had contributed to higher y-o-y pre-tax profits in 9M FY Mar 2016. Profitability, however, remains weak compared to peers.

Malaysia’s biggest pension fund is calling on the government to increase the supply of ringgit Islamic bonds as the manager of $170 bn starts a Shariah-compliant option for savers. The Employees Provident Fund (EPF) prepares to launch the Islamic plan with an initial 100 bn ringgit ($25 bn) in January. Currently the Shariah-compliant share of issuance is 42%. CEO Shahril Ridza Ridzuan said the government is actively looking at it. Boosting sales would help expand the range of maturities of the securities and their investor base. Overseas investors owned 19 bn ringgit of the government’s Islamic bonds in April, 8.2% of their total note holdings in the nation.

Deputy prime minister in charge of the economy, Mehmet Simsek, has said Turkey will hold meetings to increase sukuk exports in the first half of 2016. The country is preparing a draft law which would bring balance to the taxation of Islamic financial contracts and encourage long-term loans. Simsek said that the Ministry wants this system but implementation depends on investor interest. Regarding the establishment of a megabank in collaboration with the Islamic Development Bank (IDB), Simsek said the probable scenario includes two megabanks, one in Indonesia and the second in Turkey.

The International Islamic Liquidity Management (IILM) has successfully issued a $1.34 bn short-term Sukuk at a profit rate of 1.046%. The Sukuk rated A-1 by Standard and Poor’s will be issued on 24 May and has a maturity of 90 days. ILM sells its Sukuk through its primary dealers, who consist of: Abu Dhabi Islamic Bank, AlBaraka Turk, CIMB Islamic Bank, Luxembourg’s KBL Private Bankers, Kuwait Finance House, Maybank Islamic, National Bank of Abu Dhabi, Qatar National Bank, Standard Chartered Bank and Barwa Bank.

Nigeria hopes to use a proposed Sukuk issuance programme to help fund big infrastructure needs. The country plans to borrow as much as $10 bn from debt markets to help fund a budget deficit worsened by the slump in oil prices that has slashed revenues and weakened the naira. Secretary of finance Alhaji Mahmoud Isa-Dutse said the federal government is working on a sovereign sukuk with details expected within the year. In 2013, Nigeria's Osun State issued 10 bn naira ($62 mn) of sukuk, but no other sukuk transactions have followed.

Nigeria hopes to use a proposed Sukuk issuance programme to help fund big infrastructure needs. The country plans to borrow as much as $10 bn from debt markets to help fund a budget deficit worsened by the slump in oil prices that has slashed revenues and weakened the naira. Secretary of finance Alhaji Mahmoud Isa-Dutse said the federal government is working on a sovereign sukuk with details expected within the year. In 2013, Nigeria's Osun State issued 10 bn naira ($62 mn) of sukuk, but no other sukuk transactions have followed.

Sri Lanka could issue Sukuk and take the lead in becoming a regional centre for Islamic financial services. Bar Association President Shibly Aziz said this can open Sri Lanka to a new niche of investors, rather than the conventional ones. Sri Lanka already has more than twenty years experience in Islamic finance with an approved Islamic bank in operations.

Ezdan Holding Group has priced its inaugural Sukuk transaction in the debt capital markets with a $500m 5-year Sukuk issue. The transaction attracted an order-book up to $837m, with 71 investors participating. Investors from the Middle East took 68% of the issuance, with European investors subscribing for 21% and Asian investors taking 11%. Group CEO Ali Mohammed Al Obaidli said the investors’ strong interest resulted in the order book reaching to $837 mn, around 1.67 times of the offer amount.

Indonesia has become one of the leading sukuk issuers in the world, with issuance totaling Rp 503 trillion (US$38 bn) since its debut in 2008. Finance Minister Bambang Brodjonegoro said total outstanding sukuk was at Rp 380 trillion ($29 bn), which accounts for 15% of total government securities. He added that the latest dollar sukuk, issued in March, received a very good response from investors. For the $2.5 bn issuance, total subscription reached $8.6 bn or around 3.5 times.

Brunei's efforts to expand the scope of the financial sector are aimed at ensuring a greater diversity of public and private sector financing. In April Brunei Darussalam issued two sukuk worth a combined $150m. The first, a $50m bond with a rental rate of 1.03%, has a one-year maturity, while the second offering, a $100m sukuk with a rental rate of 0.78%, will mature in July. In the period from 2001 to 2015 Brunei Darussalam offered 119 short-term sukuk, equivalent to 2.32% of the global market by value. The Sultanate stands alongside Indonesia and Malaysia as major issuers of Islamic financial instruments in the region and is poised to play a growing role in the issuance of sukuk in coming years.

The Thomson Reuters Global Sukuk Index was last at 119.83102 points, up from 116.97354 at the end of last year. The Thomson Reuters Investment Grade Sukuk Index is at 118.12115 points against 115.21206 at end-2015. The Islamic Corporation for the Development of the Private Sector, which completed a debut sale of US$300 mn of five-year sukuk this year as well as two private placements, plans a further transaction in coming months.

The government of Bahrain has privately placed a $435 mn, three-year sukuk issue in a deal arranged by Noor Bank, Bank ABC and Kuwait Finance House. The deal was priced in the area of 325 basis points over midswaps. Strained by low oil prices, Bahrain borrowed in February $600 mn in a two-tranche reopening of a previous US dollar bond issue. On Saturday Moody's Investors Service cut its rating of Bahrain's sovereign debt by one notch to Ba2, taking the rating deeper into junk territory, with a negative outlook.

The Islamic Development Bank's annual meeting was held on Monday in Jakarta, Indonesia. At the meeting Finance Minister Bambang Brodjonegoro said sukuk played a significant role in promoting resilient infrastructure and sustainable economic development, and therefore should be boosted in the future. Indonesia has been active in sukuk markets since 2007. This year, Rp 110.9 trillion (US$ 8.33 bn) in sukuk was issued in the domestic and international markets, according to ministry data.