The International Finance Corp (IFC), the World Bank’s lender to the private sector, is considering a return to the Islamic capital market. A sukuk issuance is still in the early stages of discussion but would likely be in the 2015 fiscal year, which starts next month. The IFC, which aims to spur private investment in developing countries, last issued a USD100mln five-year sukuk in 2009, listing it on the Dubai and Bahrain bourses. Its first sukuk was in 2004 in Malaysia, a MYR500mln three-year deal.
Pakistan's central bank will auction a three-year local currency sukuk, more than a year after it last issued such an instrument, adding a much needed liquidity management tool for domestic Islamic banks. The central bank did not give a target size for the sukuk, which will be backed by motorway assets in Punjab province and use an ijarah structure. No date for the sale was announced. Pakistan issued a PKR43bln (USD438mln) three-year sukuk in March last year, using a similar structure.
RHB Asset Management (RHBAM), a wholly-owned subsidiary of RHB Investment Bank in Malaysia, has launched Hong Kong's first Shariah-compliant, actively managed Islamic balanced fund – RHB-OSK Islamic Regional Balanced Fund. RHBAM's offering in the Hong Kong Special Administrative Region (HKSAR) comes at a time when there is significant interest in Islamic finance by Hong Kong and cross-border investors.
The Securities Commission Malaysia (SC) and the Securities and Futures Commission of Hong Kong (SFC) jointly organised a seminar in Hong Kong on Islamic funds in response to the growing interest on Islamic Finance, including in the collective investment space, in Hong Kong. The half-day event on 17 June brought together over 100 policymakers, regulators and fund managers from Hong Kong and Malaysia to discuss a wide range of topics relating to Islamic funds and Islamic finance, from practical issues such as structuring and regulatory aspects of Islamic funds to a macro-view on the Islamic fund industry landscape.
Bank Internasional Indonesia (BII), a unit of Malaysia's Maybank, will sell IDR1.8tln (USD152.67bln) of bonds and sukuk on June 19 to fund domestic loans. BII will sell IDR300bln of three-year sukuk mudarabah and IDR1.5tln of seven-year bonds as part of a plan to raise IDR4tln in the next few years.
Al Hilal Bank may sell a benchmark-sized Tier 1 capital-boosting dollar sukuk issue after announcing plans to meet fixed income investors. The Islamic lender, owned by the Abu Dhabi Investment Council, has chosen itself as well as Citigroup, Emirates NBD, HSBC, National Bank of Abu Dhabi and Standard Chartered to arrange roadshows in the Middle East, Asia and Europe starting June 15. A benchmark-sized, USD-denominated perpetual sukuk offering may follow, subject to market conditions. Traditionally, benchmark size is understood to mean at least USD500mln.
Banque Saudi Fransi, Saudi Arabia’s fourth-largest listed lender, has completed a capital-boosting sukuk issue worth SAR2bln (USD533mln). The sukuk which has a ten-year lifespan but with an option for the bank to repay investors after the fifth year, was priced at 140 basis points over the three-month Saudi interbank offered rate (Saibor). The transaction, which will boost the bank's Tier 2 - or supplementary - capital, will support Banque Saudi Fransi's capital base and future growth.
The Muscat Securities Market (MSM) has revised the constituents of the bourse's Shariah Index. The index revision will be effective from June 22. The MSM Shariah Index, which currently includes 30 listed companies, will now have 31 companies that comply with the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) requirements for Islamic investment principles.
The investment banking arm of Saudi Arabia’s Al Rajhi Bank has received regulatory approval for its first mutual fund that will invest in sukuks, as demand for Shariah compliant debt rises in the Gulf’s largest economy. To date, Al Rajhi has yet to tap the sukuk market. In January, the firm said it planned to expand its business primarily by underwriting, arranging and investing in sukuk.
Europe and elsewhere
Luxembourg's plan to issue a sukuk is back on track, with the government presenting a revised bill to the Council of State, a body which advises the national legislature. AAA-rated Luxembourg is hoping to match Britain in issuing a sovereign sukuk, as both countries look to boost their Islamic finance credentials to attract more business from cash-rich Gulf countries. In March, the Council of State scrutinised the bill raising issues including the economic rationale for issuing a sukuk and a need for greater clarity on its tax treatment.
B&I Capital AG, a company located in Switzerland with an office in Singapore, and IdealRatings Inc. have announced a Shariah compliant REITs solution, for asset owners who are keen on investing in listed REITs companies, which are Shariah compliant or ethical in their business operations. Initially, B&I Capital will be managing the Al Salam REITs Fund that has an exposure to a selected number of countries in Asia. The Shariah compliant REITs exposure can be extended to global REITs, given that the IdealRatings screening solution is able to screen for global Shariah compliant REITs.
Asset management firm Arabesque has received regulatory approval to start operations with its value-based investment strategies, which also combine religious and ethical principles – the latest addition to Britain's Islamic finance sector. The London-headquartered firm now has in place a team of 18 staff, with additional offices in Frankfurt and New York. Arabesque is backed by an advisory board of ethical industry professionals, a rare feature among Islamic asset managers, as it seeks to build crossover appeal among both investor segments.
Turkish participation bank Kuveyt Turk has launched a USD500mln five-year sukuk. The transaction is set to a price at a spread of 340bps over mid-swaps. The bank has garnered orders worth more than USD3.25bln.