IslamicFinance.de

International Bank of Azerbaijan (IBA) plans to target the UAE and other Gulf investors as it plans to issue $200-$300 million debut sukuk this year, its senior manager Behnam Gurbanzade said. He further said the bank would issue sukuk in the second half of this year in order to widen its credit policy, develop business and attract alternative sources of financing. The bank, 50.2 percent owned by the Ministry of Finance, holds 40 percent of banking assets in the country. In 2014, IBA raised $252 million through an Islamic syndicated loan from UAE-based Al Hilal Bank, Dubai Islamic Bank and Noor Bank.

Tunisia will delay its planned issue of $500 million in Islamic bonds until the third quarter of the year to allow parliament time to rectify a law concerning the sale, Finance Minister Hakim Ben Hamouda said on Monday. Tunisia had initially said it would issue the Sukuk by the end of last year.

The Thomson Reuters Global Sukuk Index is at 116.23797 points, up from 115.79726 at the end of last month. The Thomson Reuters Investment Grade Sukuk Index is at 114.27454 points against 113.69014 at end-December. Some of the sukuk in the pipeline include: Dubai Islamic Bank announced plans for a benchmark-size U.S. dollar sukuk issue to boost its Tier 1 capital. Indonesia plans to issue 7.14 trillion rupiah (US$572 million) of project-based sukuk in 2015 to finance the development of three infrastructure programmes. Turkiye Finans received regulatory approval for a 71 million lira sukuk issue by trailer manufacturer Tirsan Treyler Sanayi ve Ticaret.

The busiest year on record for sovereign Islamic bond sales is poised to be eclipsed as a revival in corporate issuance takes hold in 2015. Companies in the U.K. and Hong Kong may be among those selling sukuk this year as they follow debut issues from their governments. Corporates in the Gulf Cooperation Council will be encouraged to tap the market as bank liquidity and credit conditions deteriorate amid declining oil prices. Besides, decreasing bank liquidity and demand for public debt will make sukuk issuance more attractive for GCC corporate borrowers this year.

Dubai Islamic Bank said on Tuesday it picked eight banks to arrange fixed income investor meetings from Thursday for a potential benchmark size dollar-denominated capital-boosting sukuk issue. These banks, as well as Al Hilal Bank, Emirates NBD, National Bank of Abu Dhabi, Noor Bank, Sharjah Islamic Bank will arrange the roadshows. The meetings will be held in Asia, the Middle East, and Europe and a sukuk transaction which enhances its Tier 1, or core, capital may follow subject to market conditions.

Pakistan’s dollar-denominated Islamic bonds fell for a ninth straight day, pushing the yield up 2 bps to 7.48 percent, highest since debt sold in November. Pakistan issued $1b of the 6.75% notes last month in its first dollar sukuk offering since 2005; the sale was 5 times oversubscribed.

Indonesia is ramping up financing for new President Joko Widodo’s US$439 billion (RM1.52 trillion) development programme, planning an almost fivefold increase in sales of project sukuk. The government is seeking to raise 7.14 trillion rupiah (RM196 billion) from notes that will fund construction ventures next year, compared with 1.5 trillion rupiah this year. That will help finance its estimated spending of about 5,519 trillion rupiah from next year to 2019 to build roads, railways and power plants. Indonesia is diversifying its sukuk to help boost syariah-compliant banking assets as a share of the total from 4.7 per cent, less than a fifth of Malaysia’s.

Turkish Islamic lender Turkiye Finans Katilim Bankasi has applied to issue 143 million lira ($60.5 million) via sukuk. The sukuk will be issued through TF Varlik Kiralama, a wholly-owned unit of Turkiye Finans, which has a focus on loans to corporate clients. No tenor or details of underlying assets were given for the deal. Separately, the bank has also received regulatory approval for a 71 million lira sukuk for trailer manufacturer Tirsan Treyler Sanayi ve Ticaret.

Between January-November 2014 , the global primary sukuk market recorded total issuances of USD 114.7 billion, compared to USD 105.7 billion in the same period last year. An important supporting factor for sukuk issuances are the major infrastructure needs in the GCC, South Asia, South East Asia and Africa. Islamic financial institutions (IFIs) globally are working towards full-compliance with Basel III; in this regard, recent sukuk issuances by IFIs in the GCC and Malaysia suggest that Basel III-compliant sukuks are a viable mechanism to meet the enhanced capital adequacy and liquidity standards.

Islamic bonds from the Gulf Cooperation Council (GCC) are heading for the worst month in more than a year after oil prices plunged to the lowest since 2009. Sukuk in the six-nation bloc, home to about a third of the world's proven oil reserves, lost investors 0.7 per cent so far this month, poised for the worst performance since August 2013. Middle East sukuk also underperformed non-Shariah compliant debt from the region last week. However, even after this month's drop, GCC sukuk have returned an average 5.8 percent to investors this year. Nevertheless, a prolonged period of oil price weakness will inevitably impact liquidity and credit risks in the GCC region.

The Thomson Reuters Global Sukuk Index is at 115.95508 points, up from 115.82559 at the end of last month and 109.78969 at the end of last year. The Thomson Reuters Investment Grade Sukuk Index is at 113.77886 points, against 113.92596 at end-November and 107.28036 at the end of 2013. The following are some of the sukuk issues in the pipeline: 1Malaysia Development Bhd has postponed the sale of up to 8.4 billion ringgit ($2.41 billion) of sukuk to 2015, while Indonesia's finance ministry plans to sell retail sukuk worth around 20 trillion rupiah ($1.63 billion) in April. Turkiye Finans has received regulatory approval to raise 71 million lira via sukuk, but no timeframe was given.

Dubai saw on Thursday the listing of the very first Islamic bond in its stock market by China's Hong Kong Special administrative region. The listing of the one-billion U.S. dollar sukuk marks Dubai as one of the top three listing venues in the world for sukuk, with a currently listed nominal value of 24.05 billion dollars. The Nasdaq Dubai competes with the sukuk hubs in Kuala Lumpur and in London. A total of 14.15 billion dollars of sukuks have been listed on Dubai's exchanges so far in 2014, up 107 percent from 6.85 billion dollars in 2013.

In order to hedge this unfavorable scenario of capital injection, banks are considering the use of a hybrid security known as Contingent Convertible (CoCo) bonds. CoCos are designed to help a bank meet its capital adequacy and funding requirements, while at the same time achieving favorable tax deductibility treatment. These bonds are typically structured either as contingent notes or as contingent convertible notes. However, there is less public guidance from the regulators on write-ups and Standard & Poor's predicts that the CoCo market could grow to USD 1 trillion in the next five to 10 years.

Malaysian sukuk investors are designing strategies for 2015 that will profit as a new tax both pushes up inflation and forces central bank rate increases. Malaysian consumer-price increases will average 4 percent in 2015, the highest in seven years, as a new consumption tax starts in April. One-year interest-rate swaps climbed to a six-year high of 3.87 percent this week. Experts recommend buying Islamic bonds in the middle of the so-called yield curve, which are less exposed to losses from inflation and interest-rate moves. The government will implement a 6 percent goods and services tax as part of efforts to cut the fiscal deficit that included scrapping fuel subsidies.

Nakheel today confirmed a profit payment of AED220 million on its trade creditor Sukuk. Instructions have been sent to Deutsche Bank, the registrar and paying agent for the Sukuk, to make the profit payment to all Sukuk holders on the due date of 15 December 2014 against the Sukuk issued amount of AED4.4 billion to date. Nakheel 's current portfolio of developments in Dubai includes Palm Jumeirah, The World, Deira Islands, Jumeirah Islands, Jumeirah Village, Jumeirah Park, Jumeirah Heights, The Gardens, Discovery Gardens, Al Furjan, Warsan Village and International City. Together, these span nearly 14,000 hectares and provide homes for more than 200,000 people.

Pakistan's $1 billion sukuk offering was its first shariah-compliant deal since 2005. It signals that Muslim-majority countries will actively rely on Islamic finance markets for at least part of their fundraising going forward. The sovereign's five-year sukuk closely follows its $2 billion souvereign bond sold in April - its first foray into the foreign debt markets after a seven-year hiatus. But investors have anticipated a sukuk due to its strong domestic Islamic finance market. It demonstrates that the global Islamic finance markets have developed to the point that Muslim-majority countries can rely on it for their annual fundraising plans.

Global Islamic bond sales look set to miss out on a record year after Malaysia’s sovereign wealth fund postponed what would have been 2014’s biggest offering. The top underwriter is also cautious over the coming year. Issuance to date is $2.1 billion shy of the unprecedented $46.8 billion in 2012 and more than last year’s $43.1 billion total. Bond issuance will likely taper off now as bankers and investors go on their year-end holidays. It's expected to be a challenge for sales to test new highs next year as the slump in crude oil prices may deter issuance. Most of the issuance is expected to still come from Malaysia and some from the Middle East.

The study, “Sukuk Perceptions and Forecast,” released by Thomson Reuters, said the total global outstanding sukuk, which is currently at $241 billion, is also expected to grow to $907 billion by 2020. With the potential demand for sukuk expected to outstrip supply, the global Islamic bond issuance is expected to surge to $175 billion in 2015, up from $110 in 2014, and is projected to hit $250 billion by 2020, the report said. Investors view the UK as the most attractive emerging Islamic finance market for sukuk investment while lead arrangers also expect that more sukuk would be issued from the UK. Some investors are planning to reduce their allocations to sukuk which could push yields higher.

Pakistan has received $1 billion payment for its recent sukuk sale, a spokesman for the State Bank of Pakistan (SBP) has said. The government issued sukuk on Nov 27 to raise its foreign exchange reserves in line with International Monetary Fund’s demands. The government had initially planned to float $500 million worth of the Islamic bonds. But in the wake of high demand, which rose to $2.3bn, it decided to raise $1bn. The five-year sukuk were sold at a profit rate of 6.75 per cent. The country’s total liquid foreign exchange reserves declined to $12.993bn during the week ending November 28 compared to $13.219bn the previous week.

Last week, an immunisation programme secured a $500 million (£319.4 million) issuance of sukuk, in the largest debut issue ever by a global non-profit organisation. The sukuk from the International Finance Facility for Immunisation Co (IFFIm), for which the World Bank acts as treasury manager, is part of a broader trend to use bond markets to fund development and humanitarian projects. IFFIm, backed by nine sovereign donors including Britain and France, will use the proceeds of its sukuk to finance projects for the Global Alliance for Vaccines and Immunisation (GAVI). The sukuk could encourage other non-profits to consider this funding tool.