S&P Reports ‘Sukuk’ Market is Growing, Despite ‘Some Roadblocks’

Insurance Journal: S&P Reports Sukuk Market is Growing, Despite Some Roadblocks

A report from Standard & Poor’s Paris office – The Sukuk Market Has Continued To Progress In 2009 Despite Some Roadblocks - notes that new issues of "sukuk (bonds compliant with Islamic law) topped $9.3 billion in the first seven months of 2009 compared with $11.1 billion during the same period in 2008.

"The smaller amount of issuance was due not only to the still-challenging market conditions and drying up of liquidity, but also to the less-supportive economic environment in the Gulf Cooperation Council countries, particularly in the United Arab Emirates," explained credit analyst Mohamed Damak.

"The medium-term outlook for the sukuk market remains positive, though, in our view, given the strong pipeline–with sukuk announced or being talked about in the market estimated at about $50 billion–and efforts to resolve the major difficulties impeding sukuk market development."

Malaysia has taken the lead as the major country of issuance for sukuk, accounting for about 45 percent of sukuk issuances in the first seven months of 2009. Issuers in the Kingdom of Saudi Arabia have contributed another 22 percent of sukuk issued during the same period.

S&P pointed out that the "default of a couple of sukuk was possibly partly responsible for the slowdown in issuance. The silver lining was that these defaults should provide the market with useful information on how sukuk will behave following default."

2009 London Sukuk Summit

2009 London Sukuk Summit

Two influential regulators, Tan Sri Zarinah Anwar, Chairman of the Securities Commission of Malaysia, the securities regulator, and Dr Mohammed Al-Jasser, Governor of the Saudi Arabian Monetary AgencySaudi Arabian Monetary Agency (SAMASAMA), the central bank, have won this year’s premier honour at the 2009 London Sukuk Summit Islamic Finance Awards which was held at a Gala Dinner on the evening of 2nd July 2009 at the Radisson Hotel in London. The awards formed part of the 2009 London Sukuk Summit which was held at the same hotel on 2nd-3rd July 2009.

Chairman Tan Sri Zarinah won the ‘Outstanding Contribution to the Development of Islamic Capital Markets’ Award while Governor Al-Jasser won the ‘Outstanding Contribution by a Regulator to Islamic Financial Services’ Award at a ceremony organized by London based ICG-Events.

The Awards recognizes the achievements, progress and effort by individuals and institutions in the Islamic finance space. This year there were 24 Award categories.

Tan Sri Zarinah Anwar, who took over the helm at the Securities Commission in 2006, is recognized for her vital role in expanding the role and depth of the Malaysian Islamic capital markets and promoting Islamic capital markets in regional and international bodies such as International Organisation for Securities Commissions (IOSCO). She is a strong advocate of the connectivity in global Islamic finance, and is active in promoting cross-border Islamic capital market activity.

Under her leadership, the Securities Commission, for instance, entered into a milestone agreement with the Dubai Financial Services AuthorityDubai Financial Services Authority (DFSADFSA) for the cross-border marketing of Islamic funds. Similarly, Chairman Tan Sri Zarinah introduced the pioneering Islamic Markets Programme (IMP), which entered its fourth year this year and which aims at guiding, helping and educating emerging country regulators in the field of Islamic capital markets regulation. This annual event is also part of the many initiatives undertaken by the Securities Commission to develop the talent pool for the Islamic capital market (both within and outside Malaysia), as well as promoting knowledge-sharing on the Islamic capital market.

Governor Al-Jasser, who took over in March this year, has made a rapid impact on the Islamic finance market and is an outspoken supporter of developing a world-class Islamic finance system especially in the wake of the near-collapsed financial system in the West which has been experiencing a major crisis and credit crunch. The appointment of Dr Al-Jasser has raised expectations of a greater Saudi leadership role in regional and global Islamic finance. Another prominent figure that was honoured is Dr Ahmad Mohammad Ali, President of the Jeddah-based Islamic Development BankIslamic Development Bank (IDB)(IDB), who was recognized for his ‘Outstanding Leadership in Islamic Finance’. Dr Ali has been at the helm of the IDB for almost 30 years, save a few months when he became Secretary-General of Rabita, the World Muslim League, which is based in Makkah.

Under his watch, the IDB has become an important multilateral development bank of the Muslim world, and has fostered the development of member country economies and promoted policies aimed at poverty alleviation, private sector development, the promotion of Islamic finance globally, and promoting intra-Islamic trade and investment. Currently intra-Islamic trade stands at almost 14 per cent of the total trade of the 57 Muslim countries.

Other Saudi winners recognized included The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC)Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), a member of the IDB GroupIDB Group, for the ‘Most Innovative Islamic Financing Transaction’ for the Djibouti Container Terminal Financing.

The IDB also won the ‘Most Innovative Sukuk Structure/Deal’ Award for its RM1billion Medium Term Notes facility issued in for Malaysia. Ayman Sejiny, CEO of Unicorn BankUnicorn Bank in Saudi Arabia, whose major shareholder is Dar Al-Arkan Real Estate Development Company (DAAR)Dar Al-Arkan Real Estate Development Company (DAAR), was named ‘Islamic Banker of the Year’.

DAARDAAR itself was recognized for the ‘Best Sukuk Structure by a Private Corporate Issuer’ for its recent SR750m Sukuk. Similarly, National Commercial bank of Saudi Arabia won the ‘Outstanding Contribution to the Development of Global Islamic Finance’ Award, while Siraj CapitalSiraj Capital whose major shareholder is the Al-Sulaiman Family of Saudi Arabia was named the ‘Best Islamic Wealth Management Service Provider’.

Kuwait Finance HouseKuwait Finance House, one of the largest Islamic banks in the world, won the ‘Most Innovative Islamic Bank’ Award.

This year’s ‘Zaki Badawi Award for Excellence in Shariah Advisory’ given in honour of the Late Dr Zaki Badawi, the prominent Azharite Shariah Scholar, was awarded to Dr Daud Bakar of Malaysia. The award recognizes the outstanding and impressive contribution Dr Bakar has made to the development of Fiqh Al-Muamalat not only in his native Malaysia but elsewhere in the region, the Middle East and beyond.

This year also saw two awards for the next generation of Islamic bankers. The ‘Zaki Badawi Award for Outstanding Young Shariah Advisory’ was awarded to Mufti Muhammad Nurullah Shikder, Shariah Adviser to Gatehouse Bank plc, the latest Islamic investment bank to be authorized by the United Kingdom’ Financial Services Authority (FSA). Similarly, Nazmi Camalxaman, UK Manager of CIMB Islamic Bank, won the ‘Young Islamic Banker of the Year’ Award.

Full List of the 2009 London Sukuk Summit – Islamic Finance Awards Recipients

1. Outstanding Contribution to the Development of Islamic Capital Markets
Tan Sri Zarinah Anwar, Chairman, Securities Commission of Malaysia

2. Outstanding Leadership in Islamic Finance
Dr Ahmad Mohammad Ali, President, Islamic Development BankIslamic Development Bank (IDB, Saudi Arabia)

3. Outstanding Contribution to Islamic Finance in the UK
Neil D. Miller, Partner, Norton Rose, United Kingdom

4. Most Innovative Islamic Financing Transaction
Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC)Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) for the Djibouti Container Terminal Financing, Saudi Arabia

5. Most Innovative Sukuk Structure/Deal
Islamic Development BankIslamic Development Bank (IDB)(IDB) for the RM1billion Medium Term Notes for Malaysia, Saudi Arabia

6. Best Administrator/Trustee/Bookrunner
CIMB Islamic Bank, Malaysia

7. Best Arranger(s) of a Sukuk Structure
Gatehouse Bank for the Milestone Capital Sukuk Programme, United Kingdom

8. Zaki Badawi Award for Excellence in Shariah Advisory
Dr. Daud Bakar, Malaysia

9. Zaki Badawi Award for Outstanding Young Shariah Advisory
Mufti Muhammad Nurullah Shikder, United Kingdom

10. Best International Islamic Finance Centre
Malaysia Islamic Financial Centre (MIFC)

11. Outstanding Contribution by a Law Firm to Islamic Financial Services
Norton Rose, United Kingdom

12. Islamic Banker of the Year
Ayman Sejiny, CEO, Unicorn BankUnicorn Bank, Saudi Arabia

13. Young Islamic Banker of the Year
Nazmi Camalxaman, CIMB Islamic Bank, Malaysia

14. Outstanding Contribution by a Regulator to Islamic Financial Services
Mohammad Al-Jasser, Governor, Saudi Arabian Monetary AgencySaudi Arabian Monetary Agency (SAMASAMA)

15. Most Innovative Islamic Real Estate Financing Transaction
Ali Al-Ghannam, Kuwait Finance HouseKuwait Finance House, for the Multi-Million Dollar Iskandar City Development Project, Kuwait

16. Best New Entrant in the Sukuk Market
Emirates ND, Dubai

17. Most Innovative Islamic Bank
Kuwait Finance HouseKuwait Finance House (KFH)

18. Best Sukuk Structure by a Private Corporate Issuer
Dar Al-ArkanDar Al-Arkan for the SAR 750 million Sukuk, Saudi Arabia

19. Outstanding Institutional Contribution to the Islamic Finance Sector
Lembaga Tabung Haji, Malaysia

20. Outstanding Contribution in CSR by Institution Offering Islamic Financial Services
Oasis Group Holdings of South Africa for the Restoration of the Islamic Library in Timbuktu

21. Outstanding Contribution to the Development of Global Islamic Finance
National Commercial BankNational Commercial Bank of Saudi Arabia

22. Best Islamic Wealth Management Service Provider
Siraj CapitalSiraj Capital, Saudi Arabia

23. Outstanding Contribution by an Accounting & Auditing Firm to Islamic Financial Services
KPMG, United Kingdom

24. Best Sovereign/Quasi-Sovereign Sukuk Issuance
Monetary Authority of Singapore for the Reverse Enquiry Sukuk Facility

Bahrain sukuk attracts $4 billion

Bahrain sukuk attracts $4 billion

Bahrain’s $750 million sovereign sukuk issue attracted an order book of about $4 billion with strong demand from the Middle East, a lead manager said, giving a promising sign to cash-stripped corporates to tap markets.

Bahrain, the first sovereign to issue a sukuk in the Arab region this year and only the second globally.

The initial size of the sukuk offering was $500 million, but the issue was oversubscribed by almost eight times. As a result, the value of the sukuk was raised to $750 million, a Central Bank of Bahrain statement said.

“One of the major reasons behind this issue was to establish a yield curve benchmark for longer-term Islamic securities,” said Shaikh Salman bin Isa Al Khalifa,  executive director, banking operations, CBB.

“This is a testament to Bahrain’s strong credit and the confidence which International markets place on the kingdom’s financial sector,” added Shaikh Salman.

The sukuk was priced at the low end of expectations at 340 basis points over US Treasuries.

Islamic bonds, or sukuk, are underpinned by physical assets whose returns are used to pay bond-holders, to account for Islam’s prohibition of interest.

Some 55 percent of the issue went to Middle Eastern investors, with Europe accounting for 26 percent and Asia for 15 percent of the investor base of almost 200 accounts, Dawood said.

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Saudi Arabia plans Sukuk bonds market

Saudi Arabia plans Sukuk bonds market

The Saudi stock market regulator has approved setting up a market for debt securities, it said on Saturday, responding to a long-standing demand by some firms to diversify sources of financing amid tight credit conditions.

The Capital Market Authority’s (CMA) decision is part of its "continunous and gradual effort to develop the Saudi capital market", it said in a statement posted on the bourse’s website.

The Saudi stock exchange – Tadawul – has already developed the market, which will trade bonds and sukuk Isamic bonds through licensed intermediaries, CMA said. The date of the market’s launch will be announced later, it added.

Tadawul currently trades Islamic bond issues by only two listed firms – Saudi Basic Industries Corp and Saudi Electricity. The government is a major shareholder in both firms.

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Islamic Bonds Worth $27.5 Billion to be Issued in 2009, Says Ernst & Young

Islamic Bonds Worth $27.5 Billion to be Issued in 2009, Says Ernst & Young

Although Islamic investment funds face bigger risks this year due to the global economic crisis, new issues of Islamic bonds, or sukuks, are likely to rise by 56 per cent from last year, financial services firm Ernst & Young said on Monday.

Shariah-compliant investment assets grew nearly three-fold to $736 billion in 2008 from $267 billion in the previous year, but investment growth may stall this year as large sums committed to financial instruments such as equities have been affected by the slowdown, Ernst & Young said in a report on Islamic Funds & Investments.

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