GLOBAL Islamic bond sales look set to miss out on a record year after Malaysia’s sovereign wealth fund postponed what would have been this year’s biggest offering. The top underwriter is also cautious over the coming year.
Issuance to date is US$2.1 billion (RM7.3 billion) shy of the unprecedented US$46.8 billion in 2012 and more than last year’s US$43.1 billion total, data compiled by Bloomberg show.
1Malaysia Development Bhd (1MDB) on Monday put off a plan to sell the equivalent of US$2.4 billion of sukuk until the first half of next year, said two people with knowledge of the deal.
CIMB Group Holdings Bhd, this year’s leading Islamic debt arranger, predicts that it will be a challenge for sales to test new highs next year as the slump in crude oil prices may deter issuance. Much will depend on first-time entrants coming to the market after debut offerings from the United Kingdom, Luxembourg and Hong Kong this year, according to AmInvestment Bank Bhd.
“Sukuk sales this year are unlikely to surpass 2012’s levels,” Badlisyah Abdul Ghani, chief executive officer of CIMB Islamic Bank Bhd here, said by phone on Monday. “While we could still see strong interest from issuers to tap the sukuk market next year, sentiment has turned cautious because of the volatility in oil prices.”
Global issuance of sukuk is set for the worst quarter since the three months ended June 2013, with sales so far of US$7.8 billion. In the six-member Gulf Cooperation Council, which relies on oil revenues, offerings climbed to US$2.4 billion from last quarter’s US$750 million, even as Brent crude tumbled 43 per cent from its June high.
CIMB’s Badlisyah said it may take another six months for oil prices to stabilise and issuers in the Middle East may have to sell Islamic debt to raise funds. Malaysia, which is also a net exporter of the fuel, may see support for sukuk as the government undertakes projects linked to its US$444 billion development programme, he said.
1MDB is postponing the sukuk as it seeks a six-month extension from the nation’s energy commission to build a coal-fired plant south of the capital, said one of the people familiar with the matter.
Bond issuance will likely taper off now as bankers and investors go on their year-end holidays, said Badlisyah.
Borrowers will face the prospect of higher interest rates next year as the United States Federal Reserve starts raising its benchmark rate for the first time since 2006.
(Bloomberg / 09 December 2014)
---Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com
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