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April proves lowest issuance of Sukuk year to date, shows Kuwait Finance House Research

May 22, 2011 11:23 am

Sukuk issuance during the month of April declined to the lowest level since July 2010 with $4,862.6bn coming from the primary market. The month was dominated by sovereign issuers, particularly in Malaysia where the central bank contributed $3bn of the total sukuk for the month. The Middle East market remains relatively dry this year as conditions remain tough given the continued spread of political uprisings. Hence, there have only been four corporate issues from the region so far this year.

Among the sukuk placed was the first sukuk out of Jordan by Al-Rajhi Cement, a company registered in the Dubai International Financial Centre which invests in the global cement industry. The inaugural sukuk was structured as an Ijarah transaction with a maturity of seven years. The sukuk was subscribed for by a number of leading Islamic and commercial banks including Capital Bank, Cairo Amman Bank, Islamic International Arab Bank, Union Bank, Jordan Kuwait Bank, Bank of Jordan, and Arab Islamic Bank.

The Central Bank of Bahrain issued a $530.4m Ijarah sukuk during the month with a tenure of five years. The sukuk marks the second largest issuance by the central bank and the largest issue from the country since June 2009.

Sukuk issuances for the month were led by sovereign issuers who accounted for 80.4% of the value, followed with corporates with 15.8% and government related entities with 3.8%. So far this year, sovereigns have made up for 88% of all issuance while corporate constitute 8.5%.

On the currency front, sukuk issued during March 2011 were again mostly denominated in Malaysian Ringgit, accounting for 78.1% of issuance, while the rest of the sukuk were issued in Bahraini Dinar (12.1%), Indonesian Rupiah (7.4%) and Jordanian Dinar (2.4%). The largest for the month was the Bank Negara issuance at MYR2bn ($661.64m).

A total of 53 sukuk were issued in April vs. 44 sukuk in March and 40 in February. Among these, 29 were issued by the corporate sector which totalled $772.8m (Mar: $276.4m, 180%) while there were 14 sovereign issuances which totalled $3.93bn (Mar: $3.70bn, 6.2%).

The only corporate issuance outside of Malaysia during the month of April was the Jordanian sukuk by Al-Rajhi Cement.