IslamicFinance.de

The Government of Dubai mandated five banks to arrange a benchmark-sized, dollar-denominated Islamic bond which is expected to price on Tuesday in the low four percent area. The mandated banks to arrange the deal are Dubai Islamic Bank, Emirates NBD, HSBC Holdings, National Bank of Abu Dhabi and Standard Chartered.

DanaInfra Nasional Bhd (DINB) has extended the offer period and upped the indicative profit rate of its Exchange Traded Bonds and Sukuk (ETBS), also known as DanaInfra Retail Sukuk for retail investors. The move is intended to attracting more investors to take up the new asset class. The offer period will now close on January 25th. Meanwhile, the indicative profit rate, previously at a minimum of 3.7% a year, has been altered to 4% a year. The money raised from the DanaInfra Retail Sukuk will be partially used to fund the MRT project which is worth RM15 billion.

The government of Malaysia paid higher yields for its second offering of state-backed sukuk on behalf of the national airline to entice investors. The total issuance of the notes had already reached 4.6 billion ringgit ($1.5 billion). The finance ministry was able to sell 1.2 billion ringgit of the debt on January 17th. The orders amounted to 1.5 billion ringgit. In comparison to that, rail operator Syarikat Prasarana Negara Bhd sold 3.6 billion ringgit in bids for a 2 billion ringgit sukuk sale on August 28th. The latter Shariah- compliant debt was government guaranteed as well.

Galal Amin - author of Whatever Happened to Egyptians and prominent economist - expressed his doubtful attitude towards the new sukuk introduced by the government of Egypt. At a media roundtable held at the American university in Cairo (AUC) on Wednesday, Amin as well as some other experts in economy diagnosed the Egyptian economy and cast their predictions for the current year. It was said that due to political causes of the economic crisis it is difficult to make predictions. Especially the lack of security, a lack of trust and above all the nature and content of political discourse bringing Egypt far beck were mentioned as key factors.

According to the finance minister of Egypt, the cabinet has given its approval of a draft law to allow sovereign sukuk. Thus, the government is looking for new ways to finance an unsustainable budget deficit. It is expected that there will be strong demand for Islamic bonds. The Islamic Development Bank recently announced that it could be ready to buy around $6bn of them.

According to research by Kuwait Finance House, the total of sukuk issuance by end of 2012 has amounted to $131bn. This is an increase of 54% compared to 2011. The total sukuk issuance in December is $8bn marking a 61% increase in comparison with the previous year. Malaysia is the country which issued the most sukuk, followed by Saudi Arabia, the UAE, and Indonesia.

According to Fitch Ratings, the growth of sukuk issuance in 2013 will be ensured by strong demand, mainly in originator-backed (asset-based) sukuk structures. Expectations for 2012 global sukuk issuances are for them to reach USD121b. This is an increase of 62% compared to the USD84.4bn the year before. At the moment Malaysia is the only country where sukuk rating is mandatory. The rating is considered to play a significant part in improving the confidence in this growing instrument.

Sime Darby Bhd has been approved by the Securities Commission for its proposed US$1.5bil multi-currency sukuk issuance programme. The programme is seen as a significant landmark since it is first internationally rated multi-currency syariah-compliant sukuk programme by an Asian corporate. The ratings of Sime are A, A and A3 by Standard & Poor's Rating Services, Fitch Ratings Ltd and Moody's Investor Service, Inc.

According to a statement by Prime Minister Hisham Qandil, Egypt will not use the Suez Canal or other state assets to back sukuk issues. The use of public assets such as the Suez Canal and public facilities for the issuance of instruments is excluded by the bill, which has been intensively discussed recently. Since Islam forbids interest payments, bonds must be backed by specific assets and pay investors with revenue from those assets. However, the Islamic Research Academy insists that the bill could allow authorities to abuse their control of public assets.

The Nigerian Stock Exchange (NSE) has been a witness of several stimulating initiatives in 2012 which were designed to to encourage growth in capital market activities and give the market depth. An example: Early in 2013, The NSE Lotus Islamic Index was launched to track Shariah-compliant stocks, listing rules were revised, and recently, the central government stopped value added tax (VAT) and stamp duties charged on market transactions. As a whole, the initiatives aim to transform the Nigerian market to make it more attractive for local and foreign portfolio investments and engender investor confidence.

According to an announcement by the Capital Market Authority, the listing and trading of the initial issue of Saudi ORIX Leasing Company’s Sukuk will take place on Sunday, January 13th 2013. Its symbol will be 1031.

The decision of the Islamic Research Academy of al-Azhar to reject the Ministry of Finance's bill on Islamic bonds was supported by the Shura Council (SC) Economic Committee. A member of the SC explains that the reason therefore is the lack of legitimate aspects. Meanwhile, al-Azhar Grand Imam Ahmed el-Tayyeb recently referred a new draft law on Islamic Sukuk so that al-Azhar's Senior Scholars Council can express their opinion on it.

DanaInfra Nasional Bhd's RM300 million sukuk aiming to partially fund the Klang Valley’s mass rapid transit (MRT) will make its kick-start retail trading of bonds on Bursa Malaysia. Moreover, it is likely that the sukuk will attract he issuance of private debt securities such as conventional bonds and Malaysian Government Securities (MGS) which will be publicly available. According to Tajuddin Atan - CEO of Bursa Malaysia Bhd - a number of parties have expressed their interest in issuing retail bonds. In addition, there should be ample amount of issuance for the successful trading of these bonds on the local exchange.

The final draft of Egypt's sukuk law has been submitted to the finance ministry. It will now be xamined by parliament according to the head of the Egyptian Financial Supervisory Authority (EFSA) Ashraf ElSharkawy. According to ElSharkawy, the goal of the government was social dialogue with political parties and economic associations rather than the EFSA. He further made clear that the sovereign sukuk law released by the government is designed to organise the financing of the government, state budget, national projects and public institutions.

The first exchange traded bonds and Sukuk (ETBS) has been launched on Tuesday. The sukuk was launched by Prime Minister Datuk Seri Najib Tun Razak, who explained that the retail offering would make it possible for citizens to have a stake in the country's success. Danainfra Nasional Bhd is allocating as much as RM300mil under this issuance. The initial tranche will be used to fund the first phase of the MRT Kajang to Sungai Buloh line.

The draft of Dubai Financial Market's 'Standard for Issuing, Acquiring, Trading Sukuk' has been published on DFM's website. Numerous Islamic finance professionals have been invited to counsel and feedback on the comprehensive standard. The consultation period will last until February 28, 2013. At the beginning of March, a hearing session will be held, eventually followed by the issuance itself later the same month. The Standard includes thorough explanations of different types of sukuk. Among them are Sukuk of ownership of tangible assets, Sukuk of usufructs, Sukuk of lease of services, Mudaraba, Musharaka and Salam Sukuk.

Editorial Note:
You can download the paper at: http://www.dfm.ae/Documents/gen/SukukStandards.pdf

The economic committee of the Shura Council (SC) showed its support to the Islamic Research Academy of al-Azhar's decision to reject the bill of the ministry of finance on Islamic sukuk. It is said that the bill lacked legitimate aspects. Meanwhile, a new draft law over Islamic bonds has been made public by al-Azhar Grand Sheikh Ahmed el-Tayyeb.

Syarikat Prasarana Negara plans to sell sukuk worth up to RM6 billion this year in order to fund infrastructure projects. Moreover, it is set to list its rail unit, Rapid Rail Sdn Bhd, on the local bourse by 2018 to mark further expansion in the company. The unit will be listed as soon as the Mass Rapid Transit (MRT) rail project is completed, which is scheduled for 2017.

CIMB Group Holdings Bhd received its underwriting for global and local sukuk issuance fall in 2012. Meanwhile, the market share of HSBC Bank plc grew significantly during the same period. The total issuance for global sukuk of CIMB fell from US$7.77 billion in 2011 to US$6.21 billion (RM18.82 billion). As a result, its ranking dropped to second place and its market share eased to 12% from 17.7% in 2012. HSBC reached first place with total global issuance increasing to US$11.35 billion from US$4.88 billion in 2011. Its market share rosealmost double to 21.9% from 11.1% in 2011.

The debut perpetual sukuk of Abu Dhabi Islamic Bank have rallied since their sale last month on bets the lender is well positioned to capitalise on the emirate’s economic upturn, even though debt of emerging market peers dropped. Since their issuance on November 8th, the dollar-denominated Islamic bonds yielded 6.05% on Thursday, December 27th , down 33 basis points, or 0.33 percentage point. The average yield on HSBC/Nasdaq Dubai’s US Dollar Sukuk Financial Services Index gained 17 basis points to 2.9% over the same period.