UK to issue sovereign Sukuk and launch an Islamic index on the London Stock Exchange - IFN

UK to issue sovereign Sukuk and launch an Islamic index on the London Stock Exchange

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UK: In light of the World Islamic Economic Forum which commences today, UK Prime Minister David Cameron will be revealing details of the government’s much anticipated Sukuk issuance and the launch of a new Shariah compliant index on the London Stock Exchange (LSE). According to a statement released by the government, the UK Treasury is looking to auction a GBP200 million (US$323.4 million) Sukuk next year. Speaking exclusively to Islamic Finance news, Richard Thomas, CEO of Gatehouse Bank and chair of the UK Islamic Finance Secretariat said: “This is a bold move and a necessary step for the UK government. There is a natural demand from Islamic banks in the UK for a sovereign Sukuk.” The issuance also aims to address the global demand for geographic diversification and high quality Sukuk assets. Thomas, who is involved in the issuance via his association with the UK Islamic Finance Task Force as a non-ministerial member, explained: “The Sukuk signifies the government’s recognition of the importance of establishing a legal structure linking distribution with cash-flow from a productive enterprise.” He also conveyed a positive outlook on the reception of the Sukuk noting that a broad range of investors are expected to participate due to the equivalence in its yield and pricing to conventional bonds. Nicholas Edmondes, international partner at Trowers & Hamlins, agrees with Thomas that the sovereign Sukuk is a relatively bold move for the UK government. He says that the deal would make UK the first western government to issue an Islamic bond. Edmondes further comments: “They need to have a sovereign Sukuk to set the benchmark for other corporate issuances. What would be a bolder move is to commit to a running program.” Another initiative coming from the UK is the inclusion of a Shariah compliant index on the LSE. The new indices will identify companies which meet with traditional Islamic investment principles using advanced techniques to screen financial ratios and enable investors to identify opportunities with lower volatility. This is expected to simultaneously create a new method of selecting Islamic finance investment opportunities on the exchange.