Malaysia: Overwhelming response to sukuk

KUALA LUMPUR: Malaysia has strengthened its position as a top investment destination with the overwhelming response to the government’s newly-priced global sukuk issuance, which reflects global investors’ continued confidence in the country.

Investors from a combined base of more than 195 accounts subscribed for the government’s 10-year and 30-year benchmark global trust certificates (wakala global sukuk), attracting an aggregate interest of more than US$6.3 billion (RM24.5 billion) and representing an oversubscription of 4.2 times.

Finance Ministry secretary-general Tan Sri Dr Mohd Irwan Serigar Abdullah said Malaysia remained among the faster-growing economies in the region and continued to successfully pursue fiscal consolidation while maintaining monetary and financial stability.

“This is a remarkable achievement as demonstrated by the tight pricing and excellent response to this landmark sukuk,” he said in a statement yesterday.

The government, via special purpose entity Malaysia Sukuk Global Bhd, has successfully priced the 10-year and 30-year benchmark sukuk papers at 3.18 and 4.08 per cent, respectively.

The new sukuk format uses non-physical assets to underpin an agency-based transaction known as wakala, instead of the traditional use of physical assets (commodity murabaha). 

The sukuk used vouchers representing entitlement to travel units and syariah-compliant shares, the statement said.

This could serve as a model for other sovereigns which have previously faced some difficulty in identifying and transferring tangible assets, such as buildings, for use in sukuk issuance.

The wakala sukuk are expected to be assigned ratings of “A-” by Fitch Ratings and Standard and Poor’s Ratings Services, and “A3” by Moody’s Investors Services.

The issuance is Malaysia’s fifth global sukuk, after previous issuances in 2002, 2010, 2011 and 2015.

It was priced after a roadshow across global financial centres, including Hong Kong, Singapore, Abu Dhabi, Dubai, London and New York, besides Kuala Lumpur.

CIMB, HSBC, J.P. Morgan and Maybank acted as the bookrunners and lead managers for the offering.

(News Straits Times Online / 22 April 2016)
---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com