Ample liquidity to take up sizable Sukuk (By IFN)

GLOBAL: Sales of Sukuk are at a record high this year, but there continues to be ample liquidity in the market to take up sizable offerings as investment opportunities remain in short supply.

DanaInfra Nasional, the vehicle set up to fund Malaysia’s mass rapid transit project, issued the first series of an RM8 billion (US$2.15 billion) Sukuk program on the 10th July. The RM2.4 billion (US$745.25 million) sale was oversubscribed 5.38 times, attracting RM12.92 billion (US$4.06 billion)-worth of demand.

The Sukuk was sold in tranches of seven years with a profit rate of 3.62%, 10 years (3.74%), 12 years (3.87%) and 15 years (4.04%). The offering is government-guaranteed.

The market now awaits a sovereign Sukuk offering from Qatar, which will sell a US$4 billion facility in two tranches with five and 10-year maturities today; after receiving around US$22 billion-worth of orders for the papers. Pricing for the Sukuk is expected at 120-125 basis points (bps) for the five-year tranche and 160-165 bps for the 10-year tranche.
Commenting on the large size of deals brought to market recently, Chay Wai Leong, the group managing director of K&N Kenanga Holdings, which owns Kenanga Investment Bank, said that: “There is still a shortage of supply. I don’t think we’ve reached a point of risking investor fatigue. There is always too much liquidity chasing too few products.”

Speaking to Islamic Finance news, he cautioned, however, that investors may be wary of receiving “too much” supply of the same type of credit; especially if it is low-yielding, such as government-guaranteed papers. As such, fund managers may not be able to pick up everything that is on offer, in an effort to maintain a balanced portfolio allocation.

Nonetheless, he noted that: “There is always new money coming in”, such as in Malaysia, where the Employees Provident Fund (EPF)’s investable funds amount to around RM15-20 billion (US$4.71-6.28 billion) a year.

See:http://redmoney.newsweaver.co.uk/1kfbcv95pc5h38rwoni3wx?email=true&a=6&p=25743364&t=21623024