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Thursday, 7 August 2014

Global sukuk market dips in July as corporate issuances stall

Global primary market sukuk issuances experienced a 31.4% month-on-month decline in July, as corporate issuances stalled on account of the Islamic month of Ramadan. 

July issuances amounted to $7.95bn according to Kuwait Finance House, down from $11.6bn in June.

Corporate issuers throughout the global markets remained absent from the primary market with the exception of few corporate sukuks issued in Malaysia and a sole corporate sukuk issued in Indonesia.

Collectively, these corporate sukuks produced a volume of $1.16bln or less than 15% of the new issuances market share in July as compared to the bumper $5.24bln volume or 45.3% market share in June.

On the other hand, the sovereign and quasi-sovereign issuers steered the market with a $6.79bln volume or 85.4% primary market share. Notably, the two global Islamic finance mandated multilateral entities, the Islamic Development Bank (IDB) and the International Islamic Liquidity Management Corporation (IILM) tapped the market in July, raising $1.86bn.

 The IDB issued a $1bn tranche on 17th July in a privately placed transaction as part of its upsized $10bn medium-term note programme which it had announced and received approvals for last year. The latest issue marks IDB’s third issuance this year following the $1.5bn publicly-listed tranche in March and a privately placed $100mn tranche in April.

Meanwhile, the IILM issued its third $860mn tranche, as a re-issuance for the second tranche of the same volume issued earlier in April this year and that matured on 23rd July. This latest issuance marks IILM’s seventh issuance to date since its inaugural issuance in August last year. The reissuance maintains IILM’s total short term sukuk outstanding portfolio at $1.35bn.

However, the most important limelight of the month lies in the debut of the Sub-Saharan African nation of Senegal in the global sukuk market. The Government of Senegal priced its maiden sovereign sukuk deal on 18th July, worth West Africa CFA Franc (XOF) 100bln which is equivalent to approximately $200.5mn.

Overall, the global primary market volume has reached $74.15bn in seven months ended July 2014, 6.8% higher than the $69.42bn volume in July 2013. Despite a decline in corporate issuances in July, sovereign and quasi-sovereign issuers have steered the market to ensure 2014’s annual issuances to date remain on track to overcome last year’s annual issuances volume of $119.7bn.

Analysing by the country of sukuk origination, the primary market activity was heavily concentrated in Malaysia which accounted for 80.6% or $6.41bn of the total new issuances in July.

The Malaysian market was spearheaded by Bank Negara Malaysia, which issued over USD3.4bln worth of short-term maturity sukuk. Approximately $931m was also raised by two Malaysian government-related entities, Dana Infra Nasional Berhad ($787.6mln) and Cagamas Behard ($144.5m). In the Malaysian corporate sukuk sector, five issuers tapped the market in July collectively raising $1.14bn in proceeds.

(Global Market / 06 August 2014)
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