Bahrain and Pakistan Priced New Sukuk; SAMA Instructed to Reschedule Consumer Loans

10 October 2016

Global Sukuk Markets Weekly

Bahrain and Pakistan Priced New Sukuk; SAMA Instructed to Reschedule Consumer Loans

Highlights & Performance

¨   Bloomberg Malaysia Sukuk Ex-MYR Total Return (BMSXMTR) and Dow Jones Sukuk Total Return (DJSUKTXR) index closed slightly weaker at 105.4 (-0.19%) and 163.6 (-0.25%), with the index yield rising 8bps to 2.443%. The lower indices were led by losses in perpetual banking papers such as DIB AT1 Pc3/19 (+47bps to 4.60%), ADIB AT1 Pc10/18 (+25bps to 4.03%) and AHB AT1 Pc6/19 (+23bps to 4.71%), as the markets increased the likelihood of Fed rate hike and amid concerns over a potential slowing in quantitative easing program from the ECB, although Brent oil price broke above USD50bbl for the first time since June. In addition, investors are cautious that the slump in Saudi’s construction sector (as infrastructure funding dwindles) could intensify the strain on banks’ loan quality. On 9 Oct, the Saudi Arabian Monetary Agency (SAMA) directed local lenders to reschedule the consumer loans that have been affected by the Government’s 26 Sept austerity programme, with no extra fees or changes in interest rate.

¨   Malaysia’s August trade surplus widened significantly to MYR8.5bn from MYR1.9bn in July, as a higher-than-expected rise in export growth of 1.5% YoY (Jul: -5.5% YoY) offset import growth of 4.9% YoY (July: -4.7% YoY). Within the export complex, palm oil & palm-based products and E&E export growth were stronger at 19.7% and 3.0%, with refined petroleum products falling at -12%. While BNM international reserves were flat at USD97.7bn as at 30 Sept. Malaysia’s CDS tightened slightly by -1bps to 118.0. Elsewhere, Saudi Arabia’s July non-oil exports growth fell further to -27.2% from -10.0% in June, with its CDS tightening 9.4bps to 157.6bps.

¨   Sovereign names continued to dominate the primary issuances. Kingdom of Bahrain (Ba3/BB/BB+) sold USD1.0bn 7.5y sukuk at 5.624% (MS+424bps) while Government of Pakistan (B3/B-/B) issued USD1.0bn 5y 5.500% through the Third Pakistan International Sukuk Company. In the MYR space, the MYR3.5bn 3.5y GII (new) auction drew good demand of 2.07x BTC, with yield averaging at 3.226%. Edaran SWM (NR), Johor’s sub-contractor for solid waste collections, redeemed its previous MYR750m sukuk and refinanced it with a new MYR800m sukuk — MYR500m 1-7y floating rate notes at ECOF+1.5%; and MYR300m 8-12y fixed rate bond at 6.0%.