In a year when the sukuk market should be front and centre in fund-raising activity in the Gulf Cooperation Council (GCC) region, sovereign issuers decided to look the other way and tapped the conventional bond market instead. In an effort to bolster their finances amid low oil prices due to the Covid-19 pandemic, Qatar, Abu Dhabi and Saudi Arabia raised a total of US$24 billion in a span of a little over a week in early April as most governments in the region explored different funding options.
All three sovereign issuers garnered huge investor demand with Qatar opening up the market and attracting orders of US$45 billion when it printed a US$10 billion trade. Abu Dhabi followed suit and garnered a demand of US$44 billion when it priced a US$7 billion offering, while Saudi Arabia pulled an order book of US$42 billion for a similar US$7 billion issuance.
The first sukuk from a GCC sovereign following the lockdown came from Bahrain, which priced in early May a 4-1/2-year sukuk amounting to US$1 billion together with another US$1 billion issue in conventional bonds for 10 years. The deal generated combined orders of over US$11 billion. “This demonstrates that liquidity is back into the system and the market is there even for a non-investment grade credit such as Bahrain,” a Dubai-based senior banker says.
Activity in the sukuk market activity almost came to a standstill in March and April, but issuances bounced back in May and June, according to Fitch Rating. This should boost the supply this year with financial institutions and corporates contributing to the market volume as they diversify their funding sources.
This year, several GCC issuers were cited by the board of editors of The Asset for their market-defining transactions submitted to The Triple A Islamic Finance Awards 2020, including deals with strong focus on sustainable financing. The Islamic Development Bank, based in Jeddah, Saudi Arabia, emerged as the Supranational issuer of the year as it priced the first-ever euro-denominated and AAA-rated green sukuk amounting to one billion euros (US$1.18 billion).
The Dubai-based Majid Al Futtaim Holding was voted Corporate issuer of the year for its US$600 million green sukuk, representing the first-ever benchmark size green sukuk by a corporate globally and the first green offering from a non-financial institution from the MENA region. Another GCC issuer, Qatar International Islamic Bank (QIIB), was selected as the Financial institution issuer of the year, having accessed the market twice. These included a US$300 million additional tier 1 (AT1) perpetual sukuk, which represented the first-ever AT1 issuance from Qatar in the US dollar market and achieved the lowest-ever AT1 yield from a GCC issuer.
Asia has its fair share of outstanding issuers, including the Republic of Indonesia (RoI), which was again voted as the Sovereign issuer of the year. RoI printed its second green sukuk in January 2019 amounting to US$750 million as it continued to demonstrate its commitment to sustainable financing. The proceeds were used exclusively to finance or refinance expenditures directly related to eligible green projects as defined by the RoI’s green bond and green sukuk framework.
Malaysia’s national mortgage corporation Cagamas was selected as the Quasi-sovereign issuer of the year as it continued to facilitate intermediation in the Malaysia financial system. In 2019, its aggregate issuances totaled 10.2 billion ringgit (US$2.4 billion) in both bond and sukuk – marking the company’s third consecutive year exceeding the 10 billion ringgit worth of issuances.
The International Islamic Liquidity Management Corporation (IILM) was chosen as the Islamic finance institution of the year. It continued to fulfil its mandate of providing liquidity management instruments to the market by supplying an excess of US$9 billion in 2019 across 29 US dollar sukuk through seven different tenors. The IILM is the only issuer to offer ultra-short-term tools of two-week and three-week sukuk in the Islamic finance industry.
HSBC is another big winner as it was chosen as the Islamic ESG bank of the year and the Green structuring adviser of the year – acting in such capacity in the green sukuk transactions for RoI, Islamic Development Bank and Majid Al Futtaim.
The Asset is honouring Mohamed Rafique Merican, CEO of Maybank Islamic Bank, and Bassel Gamal, group CEO of Qatar Islamic Bank (QIB), as Islamic bankers of the year, for Asia-Pacific and the Middle East, respectively. Merican plays a leading role in managing and overseeing the overall Islamic banking franchise of Maybank and ensures it operates on a parallel platform, leveraging on the group’s resources. He presided at the opening of Maybank Islamic’s first overseas branch in Dubai, after securing the full Islamic banking license from the Dubai Financial Services Authority in July 2019.
Since joining QIB as its group CEO in 2013, Gamal has led the bank transformation covering its strategy, business model, organization, operations and culture. The bank has embarked on a full digital transformation and managed to increase market shares among all business lines and products by attracting new Islamic banking clients. Under Gamal’s stewardship, QIB has the distinction of opening up the Formosa sukuk market in January this year with a US$800 million offering. This effectively introduced a new venue for Shariah-compliant issuers to diversify their funding sources.
Among the intermediaries, 2019 was considered a breakout year for Standard Chartered, which won multiple awards, including the Best investment bank for the Middle East and Sukuk adviser of the year – Global. After missing a role in the inaugural sukuk by Saudi Arabia in 2017, the bank led the sovereign when it accessed the sukuk market in October 2019 for US$2.5 billion, acting as a joint global coordinator and lead manager. The other sovereign deals it helped arrange in 2019 included those for Bahrain, Turkey and the Government of the Emirate of Sharjah.
Standard Chartered also brought a number of bank capital sukuk into the market, such as those for QIIB, Kuwait International Bank and Dubai Islamic Bank.
In Asia-Pacific, Maybank Investment Bank is named as Best investment bank and Sukuk adviser of the year, anchored by the sustainable financing-type of transactions that it helped arrange for RoI and Cypark Ref’s 550 million ringgit sukuk, which was a landmark green financing in Malaysia and selected as the Best renewable energy sukuk – Solar.
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