FW: RHB FIC Global Sukuk Markets Weekly - 19/9/14

19 September 2014

Global Sukuk Markets Weekly

Sukuk Index Fall After FOMC; New IDB 19 at 2.11%; Tactical on DPWDU 17

Highlights & Performance

¨   Sukuk returns fell w-o-w on weaker USTs as investors react to Fed policy signals.

¨   GCC 5y CDS marginally widens as tensions in Middle East controlled.

¨   Brent crude rose marginally pressured by stronger dollar on US Fed rate hike and sharp rise in crude stock.

¨   Outlook: We continue to believe 4Q14 will be the busiest quarter for sukuk primary, as evidenced by the strong demand for debut sovereign issuances e.g. Hong Kong (BTC: 4.7x) and UK (BTC: 10x). We believe that sukuk issuances in 2014 will likely surpass 2012 record year reaching USD60-70bn supported by issuances from sovereigns and financials.  Ahead of Turkey’s central bank decision next week, market consensus believes the Central Bank of Republic of Turkey (CBRT) will maintain its benchmark interest rate on 25 September at 8.25% as Governor Erdem Basci indicated sharp cuts in interest rates may have undesired impact on the TRY. 

Macroeconomics and Sovereign Comment

¨   Islamic Development Bank (IDB) (Aaa/AAA/AAA; Sta) priced the 9/19 USD1.5bn sukuk at 2.11% (MS+10bps).

¨   Abu Dhabi (AA/Aa2/AA/Sta) announces large water infrastructure project.

¨   Bank Negara Malaysia (BNM) kept rates on hold at 3.25%.

¨   South Africa (BBB-/Baa1/BBB; Neg) issued USD500mn 3.9% 5.75y sukuk, priced at lower end of initial guidance of 3.9%-3.95%.

Industry and Credit Comment

¨   Goldman Sachs (GS) (Baa2/A-/A) 5Y USD500m Sukuk saw demand after flop in first attempt.

¨   Emaar Mall Group (EMG) (Baa2/BBB-/-) IPO will raise up to AED5.8bn (USD1.6bn), representing 15.4% of total shareholdings.

¨   Ooredoo operating license in Kuwait may be suspended amid retrenchment of 60 Kuwaiti nationals.