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MALAYSIA: Continuing its
commitment to provide the Islamic banking and finance industry with
effective liquidity management tools, the International Islamic Liquidity
Management Corporation (IILM) will auction two tranches of Sukuk
collectively worth US$990 million next week on the 24th
February, the organization announced via the central bank. This
forthcoming sale will effectively bring the value of IILM’s short-term
Sukuk program to over US$2 billion.
As a measure to enhance the appeal of its regular issuance program, the
IILM has again expanded beyond its usual three-month issuances as it
seeks to issue another six-month tenor facility (worth US$500 million)
following its debut of a six-month Sukuk last August; a step most
welcomed by industry players. While it may seem counter-intuitive to
issue a relatively longer facility in an environment in dire need of shorter-term
Shariah compliant liquidity management tools, a survey conducted by IFN
(See IFN Weekly Poll Vol 11 Issue 37) indicated that a majority (58.8%)
of the respondents preferred six-month papers, with the rest divided
between one-month (17.6%) and one-week (11.8%) and the rest three-month
and one-year; demonstrating the differing liquidity management needs of
different institutions.
However, regardless of the maturity of these papers, the industry is at a
juncture whereby there is an acute shortage of highly-rated Islamic
short-term paper – therefore the availability of Shariah compliant
high-quality liquid assets (HQLA) takes precedence over the exact tenor
of these facilities.
Issuing its last Sukuk on the 22nd January (US$860 million at
a profit rate of 0.55% with a three-month tenor), the IILM has
consistently provided the market (both Islamic and conventional) with
short-term HQLA that meet Basel III requirements. The Malaysia-based
entity has also expanded its unique multi-jurisdictional primary dealer
network (including Qatar’s Barwa Bank in October) to facilitate
distribution to investors worldwide.
The forthcoming auction will feature US$490 million three-month Sukuk
that will mature on the 27th May 2015 and a US$500 million
facility maturing on the 27th August 2015.
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