Following the successful issuance in 2014 of a five year $1Bn Sukuk which attained an order book of $4.7Bn. The AA stable (S&P) / Aa1 stable (Moody's) / AA+ stable (Fitch) Government of the Hong Kong Special Administrative Region of the People’s Republic of China (HKSAR) will begin investor meetings on 18 May.
The rapid development of Islamic financial institutions and markets have enabled the penetration of mainstream finance and gaining relevance to global economic and financial flows, the National Commercial Bank said in its Saudi Economic Review for the month of January 2015.
On the Islamic equity front, the S&P 500 Shariah index ended 2014 standing at a record 1801.9, thus surging by 11.2% on a YTD basis. The USD 3-month murabahah deposit rate, the equivalent of an interbank offered rate, stood unchanged at 0.65% in 2014 compared to the 3-month LIBOR which averaged 0.23% on USD deposits in the same year.
Indonesia is the most regular issuer of global sovereign sukuk even as its Islamic banking assets and local-currency sales lag behind Malaysia.
Finance Minister Bambang Brodjonegoro said on Jan. 9 that the government will offer international sukuk in the first half, the fifth straight year it’s issued such debt. The Southeast Asian nation sold $5 billion of global sukuk in the past four years, compared with $3.25 billion for Malaysia and $2 billion for Qatar, data compiled by Bloomberg show.
This year's rush by top-rated non-Muslim countries to tap the burgeoning Islamic finance market may not be repeated next year but a new crop of sovereign entrants, mostly from emerging markets, is waiting around the corner.
The United Kingdom, Hong Kong and Luxembourg - all ranked at least AA by rating agencies - issued sharia-compliant financial instruments, or sukuk, for the first time in 2014. They gave a huge boost to a market which was once just seen as a funding tool for borrowers from the Gulf and Muslim countries in southeast Asia.
sold $1 billion of sovereign Islamic bonds in its first-ever issue of the securities, attracting orders for 4.7 times the amount on offer.
The dollar-denominated five-year notes were priced at a 2.005 percent profit rate, according to a on the government’s website today. The U.K., which along with Hong Kong is rated the highest investment grade, sold sukuk for the first time in June at a coupon of 2.036 percent. Those notes yielded 1.75 percent today, data compiled by Bloomberg show.
First-time sellers of bonds that adhere to Islam’s ban on interest are poised to revive an industry suffering its worst quarter in more than four years.
Luxembourg and Hong Kong aim to market debut offerings of sukuk next month, while , , and Tatarstan have announced plans for maiden issues. Islamic bond sales have fallen 82 percent to $2.6 billion this quarter compared with the previous three months, their lowest level since the first three months of 2010, according to data compiled by Bloomberg.
Luxembourg will start meeting investors in the next two months to drum up support for a debut sale of shariah compliant bonds as sukuk sales surge worldwide.
The country, which has an AAA credit rating at Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, is planning to become the second non-Muslim nation to issue a sovereign Islamic bond after the U.K. raised 200 million pounds ($335 million) in June. Ministry of Finance officials will meet investors in , the , and from the end of September to promote the proposed sale, according to an e-mailed statement Aug. 7.
Hong Kong, Indonesia and Pakistan are banking on pent-up investor demand as they look to raise up to a combined US$3.5bn in the fast-growing Islamic bond market.
The three sovereign sukuk issues, including a planned US$1bn debut from Triple A rated Hong Kong, are set to launch before the end of September.
Few Asian issuers have targeted the global sukuk market in the past, and the glut of deals comes as governments across Asia are looking to attract Islamic investors from outside the region.
Hong Kong’s government plans to issue as much as US$1 billion worth of Islamic bonds later this year, a spokesperson for its central bank said, suggesting the territory’s debut sukuk issue might be larger than initially expected.
Lawmakers in Hong Kong passed a bill last month that will allow the AAA-rated government to issue sukuk for the first time. A report by the territory’s Legislative Council indicated the size would be around $500 million.
Islamic finance has been one of the fastest-growing sectors in global finance but the industry has yet to shake off perceptions about high costs and complexity that are holding back some issuers.
Sukuk, or Islamic bonds that follow religious principles such as a ban on interest and speculation, are now a major funding tool for companies in the Middle East and southeast Asia, and are becoming increasingly attractive to sovereign issuers.