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GLOBAL: After months
of anticipation, Hong Kong and Sharjah have both finally issued their
long-awaited sovereign Sukuk, making a dual debut in the Islamic capital
space. As expected, both issues received overwhelming response, in line
with the optimistic industry forecast for the sovereign Sukuk market (see
IFN Report Vol. 11 Issue 36).
Joining its siblings (Dubai and Abu Dhabi) in the Islamic capital
markets, UAE’s Sharjah sold US$750 million in Sukuk on the 10th
September. The 10-year facility was over 10 times oversubscribed by
global investors, garnering an exceptional orderbook of US$7.85 billion.
Based on the popular Ijarah contract, the ‘(P)A3’-rated (by Moody’s)
program carries a profit rate of 3.76% and is due to be listed on NASDAQ
Dubai as well as the Irish Stock Exchange.
“From a financial perspective, the transaction has helped the government
to diversify its investor base, access longer fixed-term tenors and
optimize pricing,” the government said. “From a wider economic
perspective, the issuance will provide a benchmark for any transactions
undertaken by Sharjah entities in both the wider public sector and the
private sector. It will also enhance the efforts of the UAE authorities
to develop local financial markets.”
Meanwhile over in Asia Pacific, Hong Kong – a once favored contender of
the Sukuk race between non-Muslim sovereigns – has finally caught up with
the UK in tapping the global Islamic financial markets as a
non-traditional issuer. Its US$1 billion five-year facility was priced at
23bps over five-year US Treasuries at 2.01% and attracted orders
exceeding US$4.7 billion from a wide range of conventional and
Shariah-seeking investors. The program gained a diverse geographic
distribution with nearly half (47%) of the 120 international investors
coming from Asia, along with 36% from the Middle East, 11% from the US
and 6% from Europe. Banks formed the largest purchasers of the debt
(56%), followed by sovereign wealth funds, central banks and
supranationals (30%), fund managers (11%) and insurance companies (3%).
Expressing his delight at the strong demand received for the Hong Kong
Sukuk, as evidenced by its significant orderbook and tight pricing, John
C Tsang, the government’s financial secretary, said: “The success of this
transaction demonstrates that issuance of Sukuk using Hong Kong’s
platform is a viable fundraising option and widely accepted by investors
around the world. I hope that the Sukuk issuance will catalyze the
further growth of the Sukuk market in Hong Kong by encouraging more
issuers and investors to participate in the market.”
Registering a cumulative annual growth rate of 30% since 2003 and
commanding approximately 36% of the outstanding global Sukuk market
valued at US$296 billion as of July 2014, the sovereign Sukuk market is
on an upward trend: buoyed by increasing global government participation
and strong economic dynamics. Moody’s Investor Services expects an
additional US$30 billion-worth of government Islamic securities this
year, bringing the estimated overall outstanding amount of sovereign Sukuk
to reach US$115 billion by the end of 2014.
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