Tuesday, January 13, 2015

Bahrain targets retail market in next week’s sale of long-term Sukuk


Islamic Finance news Alert
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Monday, 12th January 2015

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HIGHLIGHTS: Bahrain to offer 10-year Sukuk next week – Bank Asya offloads stake in Tamweel – CIMB Group and RHB Capital reconsider merger terms


Daily Cover


BAHRAIN: The Central Bank of Bahrain (CBB) will issue BHD100 million (US$263.55 million) in Sukuk Ijarah next week, on the 19th January, in which investors would be able for the first time ever, subscribe directly in the primary market through registered brokers at Bahrain Bourse (BHB), according to an official announcement by the bourse.

This announcement comes following BHB and CBB’s joint effort to enhance the kingdom’s bond and Sukuk market via the introduction of a pioneering mechanism allowing direct ownership in government debts (See IFN Daily Cover on the 7th January 2015: ‘Bahrain engineers pioneering mechanism to advance Islamic debt capital market’). While already a successful Sukuk issuer, it is apparent that the government, via the central bank and BHB, is looking to attract a wider retail investor base in the upcoming issuance.

Apart from exempting charges related to account opening for the purpose of purchasing government Sukuk during the whole month of January, BHB has set the minimum subscription at BHD500 (US$1,317.77); while for subscribers applying for BHD10,000 (US$26,355.3) and above, a minimum allotment of 10,000 Sukuk will be assigned to every subscriber, with the remaining quantity to be allocated on a pro rata basis. The instruments are underpinned by assets owned by the Bahraini government, in particular land in Zallaq.

To be issued at a par value of BHD1 (US$2.63) apiece, the impending issuance also has several distinctive features unique from previous monthly government Sukuk programs. For starters, the facility will be for an extended tenor of 10 years instead of the usual three months (the latest CBB Sukuk Ijarah, however, carried a three-year maturity). And while the monthly programs in general were assigned profit rates of less than 1% to 3%, the upcoming issuance will carry a much higher return rate of 5.5%.

While there may not be a need for the government to set such an attractive rate of return considering the consistent phenomenal demand for its Sukuk programs (the previous two Sukuk Ijarah were oversubscribed by at least three-fold while the latest Sukuk Salam oversubscribed by almost two-fold), doing so would almost certainly drum up retail demand. With this, we can expect to see a surge in the primary Sukuk market of Bahrain, but will we see similar interest in the secondary Islamic debt market? Only time will tell.



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Today's IFN Alerts


UAE: Emaar announces periodic distribution for Sukuk payable on the 3rd February 2015

TURKEY: Bank Asya offloads stake in Tamweel

MALAYSIA: CIMB Group and RHB Capital contemplate amendment of merger terms on the back of declining share prices

SAUDI ARABIA: Gulf International Bank officially launches online retail banking service 'meem'

GLOBAL: Arcapita sells stake in Lusail Golf Development to Barwa Real Estate Company

MALAYSIA: CIMB Islamic agrees to fund creation of Universiti Islam Malaysia's Chair for Waqf and Islamic finance library

UAE: Sharjah Islamic Bank launches new editions of emiratization development programs

MALAYSIA: Permodalan BSN announces income distribution for Shariah compliant funds

MALAYSIA: RAM maintains Cagamas MBS's Sukuk Musharakah rating at 'AAA/Stable'

MALAYSIA: MARC affirms Alam Maritim Resources's Sukuk rating at 'A+IS'; revises outlook to negative

YEMEN: Tadhamon International Islamic Bank receives ratings from Capital Intelligence

MALAYSIA: Bursa Malaysia appoints Amirsham Abdul Aziz as non-executive chairman















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