TURKEY: The Republic
of Turkey yesterday issued its inaugural 10-year sovereign Islamic debt
to overwhelming demand following a plunge in yields on its existing Sukuk
to a 17-month low. The issuance marks the third time the country has
tapped the Sukuk markets, cementing its commitment to be a prominent
player in the Islamic debt capital market space.
Offering a yield of 4.48%, the US$1 billion dollar-denominated facility
attracted more than thrice the demand with approximately US$3.4 billion
pouring in before the London market opened. The paper was sold at 205bps
over US Treasury midswaps, tighter than the initial profit thoughts of
220bps. Comparing Turkey’s latest offering with its previous issuances (a
US$1.5 billion 2.8% 5.5-year note in 2012 and 4.56% US$1.25 billion
five-year facility in 2013), Mohamad Safri Shahul Hamid, senior managing
director and deputy CEO of CIMB Islamic (one of the joint lead managers
for this deal), described to IFN that: “This transaction is extremely
significant to the government as it helps create a new benchmark curve
for Turkey and at the same time reinforces the government's continued
commitment towards Islamic finance.”
Safri further elaborated that the issuance had also elevated Turkey into
an "elite" list of 10-year sovereign global Sukuk issuers,
providing the investors with an opportunity of diversifying their
investment horizon beyond the previously five-year sweet spot – this
bodes well to the market as a whole. “In short, the success of this
transaction and the recent Government of Indonesia trade had also helped
alleviate whatever concerns the market (had) in terms of Sukuk longevity
and are expected to pave the way for the other issuers, sovereigns and
corporates to consider a longer tenure for their own global Sukuk issuances.”
Arranged by CIMB Islamic, Citigroup and HSBC, the exceptional response
for Turkey’s latest RegS/144A deal does not come as a surprise as market
sentiments for republic have been increasingly optimistic of late despite
fluctuating global economic environment. Analysts have noted the renewed
interest in Turkish fixed income as declining prices in Brent Crude are
narrowing current-account deficit in emerging markets. The republic is
also strategically positioned to absorb capital previously allocated for
Russia as investors flee the sanction-hit country driven by the
tumultuous conflict with Ukraine. In the first eight months of 2014
alone, Turkey has seen foreign direct investment rise by 9.8%
year-on-year to US$8.6 billion, resonating with a 2013 EY survey which
saw more than 50% of its total respondents expressing keen interest in
investing in the republic within the next three years.
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