Financial Islam - Islamic Finance
  • Home
  • News
  • Islamic Economics
    • The ownership of wealth
    • The Islamic economic system
    • Prohibition of Riba, Maysir and Gharar
    • Financial intermediation
    • Shareholding in Islam
    • Islamic Commercial contracts >
      • Valid transactions
      • Loans and debts in the Sharia'h
      • Mudarabah
      • Musharakah
      • Diminishing Musharakah
      • Murabahah
      • Salam
      • Istisna'a
      • Ijarah
      • Wakalah
      • Other contracts
  • Islamic Banking Operations
    • Investment and transactions
    • Deposits
    • Islamic credit cards
    • Fee-based services
    • Letter of Credit
    • Bank Guarantee
    • Modes of financing >
      • Ijarah financing
      • Musharakah and Mudarabah certificates
      • Diminishing Musharakah
      • Replacing interest-based lending
  • Regulation and Supervision
    • The Islamic Development Bank
    • Shari’ah Boards
    • Islamic accounting
    • Financial statements analysis
    • The Organising group
    • Relationship with central banks
    • Operations within the conventional system
  • Capital Market Operations
    • Islamic Unit Trusts
    • Islamic Fund Structures
    • Investment screening
    • Islamic Market Indexes
    • Islamic ETF
    • Venture Capital
    • Foreign exchange
  • Securisation and Sukuk
    • Sukuk structures
    • Controversy
    • Indexation of financial obligations
    • Risks underlying Sukuk
  • Takaful - Islamic Insurance
    • Takaful Agreements
    • Takaful models
    • Areas of Takaful
    • General insurance
    • Life insurance
    • Reinsurance
    • Corporate Governance
  • Video Zone
  • Events Agenda 2016
    • Events Agenda 2011
    • Events Agenda 2010
    • Events Agenda 2015 >
      • Events Agenda 2012
      • Events Agenda 2013
      • Events Agenda 2014
  • Careers
  • Education and Training
  • Glossary
  • Contact

Saudi companies may beat Malaysia on debt sales in 2011

12/19/2010

0 Comments

 
Picture
Saudi Arabia may overtake Malaysia as the largest issuer of Islamic bonds for the first time in 2011 as the kingdom’s 1.44 trillion-riyal ($384 billion) stimulus plan boosts spending.

Saudi Electricity Co., the Arab world’s largest utility by market value, will finance more than 30 billion riyals ($8 billion) of projects, Chief Executive Officer Ali Al-Barrak said in a Dec. 14 interview. Saudi International Petrochemical Co. said Dec. 14 it may sell as much as 2 billion riyals of Shariah- compliant debt in the first quarter. Sukuk from borrowers in the largest Arab economy totaled $2.3 billion this year, compared with $7.3 billion of local-currency debt sales in Malaysia, data compiled by Bloomberg show.

 “The Saudi market could easily become the largest sukuk issuer simply because Saudi sukuk are much larger,” Tariq Al- Rifai, director of Islamic Market Indexes in Dubai for Dow Jones Indexes, part of a joint venture 90 percent owned by CME Group Inc. and 10 percent by News Corp.’s Dow Jones & Co., said in an e-mailed response to questions Dec. 17.

The world’s largest oil exporter announced in August a five-year development plan to spur economic growth, create jobs and diversify its economy away from hydrocarbons. Borrowers from the kingdom are tapping the Islamic debt market to fund expansion, John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh, said Dec. 16.

‘Unique Position’

State-controlled Saudi Electricity and Dar Al Arkan Real Estate Development Co., the biggest Saudi developer, led sales of sukuk from the Gulf this year, according to data compiled by Bloomberg.

Saudi Electricity sold 7 billion riyals of 20-year Islamic bonds in May at 95 basis points more than the three-month Saudi riyal interbank offered rate. Investors placed 27 billion riyals of bids, the company said May 12.

Dar Al Arkan sold $450 million of sukuk in February. National Commercial Bank, Saudi Arabia’s largest lender, will sell its first sukuk in the second quarter, Executive Vice President Abdulrazzak Elkhraijy said Nov. 22.

Companies in the kingdom are in a “unique position in raising much more cost competitive capital than anyone else in the region due to the low risk profile of Saudi Arabia,” Sfakianakis said in a telephone interview. “There is no doubt that 2011 will be a solid year for private-sector growth.”

Sukuk Sales

Economic growth in Saudi Arabia will accelerate to 4.5 percent in 2011 from 3.4 percent this year, the International Monetary Fund said in its World Economic Outlook report in October. The country, which holds 20 percent of the world’s proven oil reserves, is rated Aa3 by Moody’s Investors Service and AA- by Standard & Poor’s, the fourth-highest ratings.

Sales of Islamic bonds from six issuers in the six-nation Gulf Cooperation Council dropped 32 percent to $4.5 billion in 2010, the least since 2005, after debt restructurings, defaults and tumbling property prices hurt investors’ confidence.

The Malaysian government’s 10-year initiative for private- led projects ranging from a nuclear power plant to an underground rail network will spur sales of Shariah-compliant debt, Kuala Lumpur-based RHB Investment Management Sdn.’s Chief Executive Officer Sharifatul Hanizah Said Ali said Dec. 15.

“There is more demand from local investors for Malaysian ringgit sukuk than there is local demand for sukuk in the Middle East,” Naji Nabaa, a Dubai-based associate director of fixed- income sales for the Middle East and North Africa at Exotix Ltd., an investment bank specializing in infrequently traded assets, said in a telephone interview yesterday. “Malaysia will continue to dominate the sukuk market in 2011 in terms of the number of Islamic bonds issued.”

Narrowing Gap

The extra yield investors demand to hold Dubai’s government sukuk rather than Malaysia’s narrowed 46 basis points this month to 344, data compiled by Bloomberg show. The yield on Dubai’s 6.396 percent sukuk maturing in November 2014 dropped 3.6 basis points to 6.54 percent today, according to Bloomberg data.

Shariah-compliant debt in the GCC returned 12.9 percent this year, HSBC/NASDAQ Dubai GCC US Dollar Sukuk Index shows. Global sukuk returned 12.2 percent this year, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. Bonds in developing markets gained 11.4 percent, JPMorgan Chase & Co.’s EMBI Global Diversified Index shows.

Riyal Sukuk

The difference between the average yield for emerging market sukuk and the London interbank offered rate narrowed 61 basis points this month to 300 on Dec. 17, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. In the GCC, which includes Qatar, the United Arab Emirates and Kuwait, the gap shrank 67 basis points to 372 on Dec. 17.

Petrochemical makers in the Persian Gulf will invest $50 billion by 2015 and boost output by 46 percent to 154 million tons annually over the period, Abdulwahab al-Sadoun, secretary general of the head of the Gulf Petrochemicals & Chemicals Association, said in Dubai on Dec. 6. Most of the investments are expected to be made in Saudi Arabia, he said.

“Saudi utilities and smaller corporates will most likely look at riyal sukuk, just because the domestic demand is there,” said Al-Rifai.

Source: Bloomberg

0 Comments



Leave a Reply.

    Picture

    RSS Feed


    Topics

    All
    Aaoifi
    Accounting
    Afghanistan
    Algeria
    Asset Management
    Australia
    Azerbaijan
    Bahrain
    Bangladesh
    Bermuda
    Brazil
    Brunei
    Cambodia
    Canada
    China
    Commodities
    Consulting
    Credit Card
    Crisis
    Croatia
    Currencies
    Debt
    Derivatives
    Egypt
    Equities
    France
    Germany
    Ghana
    Hong Kong
    Ifsb
    Iifm
    India
    Indonesia
    Ipo
    Iran
    Iraq
    Ireland
    Isda
    Islamic Development Bank
    Italy
    Japan
    Jordan
    Kazakhstan
    Kenya
    Kuwait
    Kyrgyzstan
    Lebanon
    Libya
    Liquidity
    Luxembourg
    Malaysia
    Maldives
    Malta
    Mauritius
    Mexico
    Microfinance
    Morocco
    Nigeria
    Oman
    Pakistan
    Palestine
    Philippines
    Qatar
    Rating
    Real Estate
    Risk
    Russia
    Saudi Arabia
    Senegal
    Shariah Board
    Singapore
    South Africa
    South Korea
    Spain
    Sri Lanka
    Sudan
    Sukuk
    Swaziland
    Switzerland
    Syria
    Takaful
    Tanzania
    Thailand
    Tunisia
    Turkey
    Uae
    Uk
    Usa
    Wealth Management
    Yemen

Powered by
✕