The Petronas Twin Towers stand illuminated among other buildings at dusk in Kuala Lumpur. Energy giant Petronas began roadshows on March 5 to raise up to a staggering $17bn from conventional and Islamic bonds, whereby as much as $2bn are planned to be raised via US dollar-denominated sukuk.
By Arno Maierbrugger/Gulf Times Correspondent /Bangkok
Asian countries will contribute heavily to the sukuk pipeline in 2015, a number of announcements show. Not only Malaysia, which has the largest market share in Islamic finance in the region and accounts for more than two-thirds of global issuances, but also other countries, including such with a non-Muslim majority, as well as large companies, will tap the international sukuk market this year to fund their spending plans.
The global sukuk market has been growing strongly in the past, driven by greater awareness of global investors of Islamic finance vehicles and their structure, increasing liquidity in the sector, growing retail and corporate demand for Islamic financial services and increasing standardisation of Islamic financial instruments. Moreover, non-Islamic countries such as the UK, Luxemburg, South Africa, Hong Kong and a few others have entered the scene with successful sukuk issuances.
The value of outstanding sukuk was $118bn at the end of 2014, with the value of annual issuances having risen four-fold over 2010.
What will be the largest Asian issuances in 2015?
Malaysia’s state-backed mortgage corporation Cagamas said that it will raise up to $2.5bn with a multi-currency Islamic bond programme this year. Malaysian energy giant Petronas began roadshows on March 5 to raise up to a staggering $17bn from conventional and Islamic bonds, whereby as much as $2bn are planned to be raised via US dollar-denominated sukuk.
In Indonesia, the finance ministry plans to sell retail sukuk worth around $1.5bn in April. The government further plans to issue $540mn of project-based sukuk in 2015 to finance infrastructure programmes and develop the sukuk market in general.
China’s Muslim-majority Ningxia Hui Autonomous Region plans the global issue of up to $1.5bn worth of instruments such as sukuk and US dollar bonds, according to Beijing-based securities company AVIC Capital Co.
CIMB Islamic, the Shariah-compliant unit of Malaysia’s second largest bank CIMB, is preparing an Islamic bond programme to raise up to $1.3bn. Real estate investment trust Axis REIT will follow suit and expand its ongoing sukuk programme to $810mn from its existing less than S100mn in a perpetual programme.
Telekom Malaysia will set up a $750mn multi-currency sukuk programme. Malaysian property developer Sunway will raise up to $540mn by issuing short- and medium-term notes, and Point Zone, a subsidiary of Malaysia’s hospital group KPJ Healthcare, will establish a sukuk programme of up to $405mn.
Again in Indonesia, national airline Garuda Indonesia said it will issue a $500mn sukuk later this year to refinance other loans in what would be the first offshore sukuk issue from an Indonesian corporation.
Malaysia’s sovereign wealth fund Khazanah Nasional plans to issue sukuk worth up to $270mn to help fund schools, its managing director said in February. As for newcomers on the sukuk sector in Asia, the International Bank of Azerbaijan, the country’s largest, plans to issue a debut sukuk worth between $200mn and $300mn. The country joins Kazakhstan which is set to make its second international issue of sukuk this year after it tested the waters with a small $73mn sukuk in 2012, the first Islamic bond issue from a former Soviet state.
In Australia, SGI-Mitabu, a consortium of two solar energy companies, plans to issue a $117mn sukuk in July via a vehicle domiciled in Malaysia’s offshore financial centre of Labuan. This “solar sukuk” would be the first issuance of a sukuk by Australia or an Australian company, making the country the latest entrant into the Islamic debt market.