South Africa is not planning to issue a US dollar-denominated sukuk in 2015, though it may print one in 2016, according to a funding official.
"It's quite possible there will be a sukuk at some point," Tshepiso Moahloli, director of debt issuance and management in South Africa's national treasury, told IFR on the sidelines of a Euromoney conference, late on Wednesday. "There will not be one this year. It may be next 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.
African governments are looking to sharia-compliant financial markets to attract investment from the Middle East. The trend is just gathering strength, and experts expect more funds to flow into infrastructure and other major projects.
The latest wave of finance to reach African corporations and governments is coming from the Middle East, with an increasingly large sharia-compliant component.
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.
said it appointed BNP Paribas SA, KFH Investment and Standard Bank Group Ltd. to arrange a debut sukuk sale of at least $500 million.
Investor meetings will be held next month in Europe, Asia and the , Tshepiso Moahloli, director of debt issuance and management at the Pretoria-based National Treasury, said in an e-mailed response to questions. Meetings will run from Sept. 8 to Sept. 12, according to two people with knowledge of the proposal, who asked not to be identified because they aren’t authorized to speak publicly.
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.
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.