Sukuk Trends and listing on Stock Exchanges and Use of Sukuk/Islamic Securities as Collateral Current Status, Developments and Key Challenges

Transcription

1 Sukuk Trends and listing on Stock Exchanges and Use of Sukuk/Islamic Securities as Collateral Current Status, Developments and Key Challenges 11 th Meeting of the Organisation of Islamic Cooperation (OIC) Member Staters Stock Exchanges Forum Tuesday, 31 st October 2017, Le Meridien Etiler Hotel, Istanbul Ijlal Ahmed Alvi Chief Executive Officer, IIFM

2 Sukuk Market Current Status a) Total Global Sukuk Issuances (International & Domestic)

3 Total Global Sukuk Issuances (Jan 2001 September 2017) All Tenors, All Currencies, in USD Millions 160, , , , , , ,000 93,573 88,279 80,000 60,000 40,000 20,000 19,215 14,008 33,607 50,041 24,337 38,070 53,125 60,693 62,195 0 Total Global Sukuk Issuances as September 2017 USD 918,913 Millions Source: IIFM Sukuk database 1

4 Total INTERNATIONAL Sukuk Issuances (Jan 2001 September 2017) All Tenors, All Currencies, in USD Millions 35,000 30,000 27,730 31,561 31,002 25,000 20,000 20,269 23,305 20,880 15,000 10,000 5,000 5,988 3,723 11,852 13,859 2,210 7,166 4,098 9,084 0 Total International Sukuk Issuances as of September 2017 USD 212,727 Millions Source: IIFM Sukuk database 2

5 Total DOMESTIC Sukuk Issuances (Jan September 2017) All Tenors, All Currencies, in USD Millions 140, , , , ,000 80,000 84,490 80,570 60,000 40,000 20,000 13,227 10,286 21,755 36,182 22,127 30,904 49,027 39,813 56,718 31,192 0 Total Domestic Sukuk Issuances as of September 2017 USD 706,186 Millions Source: IIFM Sukuk database 3

6 Sukuk Market Current Status b) Total Global Sukuk Issuances Breakdown by Issuer Status

7 Global Sovereign Sukuk Issuances (Jan 2001 Dec 2016), All Tenors, All Currencies, in USD Millions 4

8 Global Corporate Sukuk Issuances, (Jan 2001 Dec 2016), All Tenors, All Currencies, in USD Millions 5

9 Global IFIs Sukuk Issuances, (Jan 2001 Dec 2016), All Tenors, All Currencies, in USD Millions 6

10 Global Quasi Sovereign Sukuk Issuances, (Jan 2001 Dec 2016), All Tenors, All Currencies, in USD Millions 7

11 DOMESTIC Sukuk Issuances by Issuer Status All Tenors, All Currencies, in USD Millions 8

12 DOMESTIC Sukuk Issuances by Issuer Status All Tenors, All Currencies, in USD Millions 9

13 INTERNATIONAL Sukuk Issuances by Issuer Status All Tenors, All Currencies, in USD Millions 10

14 INTERNATIONAL Sukuk Issuances by Issuer Status All Tenors, All Currencies, in USD Millions 11

15 Sukuk Market Current Status c) Total Global Sukuk Issuances

16 REGIONAL BREAK - UP OF GLOBAL ISSUANCES (JAN DEC 2016) 12

17 REGIONAL BREAK - UP OF GLOBAL ISSUANCES (JAN DEC 2016) Continuation 13

18 Sukuk Market Current Status d) Global Sukuk Issuances Structural Breakdown (International & Domestic)

19 Structural Breakdown of INTERNATIONAL Sukuk Issuances - All Tenors, All Currencies, in USD Millions 14

20 Structural Breakdown of INTERNATIONAL Sukuk Issuances - All Tenors, All Currencies, in USD Millions 15

21 Structural Breakdown of INTERNATIONAL Sukuk Issuances - All Tenors, All Currencies, in USD Millions 16

22 Structural Breakdown of Domestic Sukuk Issuances - All Tenors, All Currencies, in USD Millions 17

23 Structural Breakdown of Domestic Sukuk Issuances - All Tenors, All Currencies, in USD Millions 18

24 Structural Breakdown of Domestic Sukuk Issuances - All Tenors, All Currencies, in USD Millions 19

25 Sukuk Market Current Status E) Global Outstanding Sukuk Breakdown (International & Domestic)

26 Total Global SUKUK Outstanding As of 31st December 2016, All Tenors, All Currencies, in USD Millions 20

27 Total Global SUKUK Outstanding by issuer Status As of 31st December 2016, All Tenors, All Currencies, in USD Millions 21

28 Total Domestic SUKUK Outstanding As of31st December 2016, All Tenors, All Currencies, in USD Millions 22

29 Total Domestic SUKUK Outstanding by Issuer Status As of 31st December 2016, All Tenors, All Currencies, in USD Millions 23

30 Total International SUKUK Outstanding As of 31st December2016, All Tenors, All Currencies, in USD Millions 24

31 Total International SUKUK Outstanding by Issuer Status As of 31st December 2016 (in USD Millions) 25

32 Countries wise Breakdown of Global SUKUK Outstanding As of 31st December 2016, All Tenors, All Currencies, in USD Millions 26

33 Sukuk listing on Stock Exchanges

34 USD Billions Sukuk Listing Centers by Nominal Value Dubai Ireland Malaysia UK No. of Sukuk Source: NASDAQ Dubai/IIFM Sukuk Report 27

35 New Admissions of Sukuk Dubai Ireland Malaysia UK No. of Sukuk Dubai Ireland Malaysia UK Source: NASDAQ Dubai/IIFM Sukuk Report 28

36 Origin of Sukuk Listed on Top Markets (USD Billions) Source: NASDAQ Dubai/IIFM Sukuk Report 29

37 Turkish Sukuk Listing Source: Borsa Istanbul 30

38 Turkish Domeitc Sukuk Listing Source: Borsa Istanbul 31

39 Bahrain Domestic Sukuk Listing Listing date Issuer Issue Type Amount - USD Millions Face Value 19-Jan-15 Government of the Kingdom of Bahrain Sukuk Al Ijarah 660 $ Aug-15 Government of the Kingdom of Bahrain Sukuk Al Ijarah 264 $ Aug-15 Government of the Kingdom of Bahrain Sukuk Al Ijarah 530 $2.64 Total 1,454 Source: Bahrain Bourse 32

40 Exchangeable Sukuk Issuances

41 Total Islamic Exchangeable Sukuk Issuances Jan Dec 2016 The National Central Cooling Company ('Tabreed'), 408, 5% Aabar Petroleum Investment Company PJSC, 460, 6% The Nakheel Group, 750, 9% Tamweel PJSC, 300, 4% Khazanah Nasional berhad, 3531, 44% Aldar Properties PJSC, 2530, 32% Source: IIFM Sukuk Database 33

42 Total Islamic Exchangeable Sukuk Issuances Jan Dec 2016 Issue Date Obligor Issuer Country Currency Issue Type International/ Domestic Amount (USD Millions) 2-Jun-06Aabar Petroleum Investment Company PJSC UAE USD Corporate International Feb-07Aldar Properties PJSC UAE USD Corporate International 2,530 1-Sep-16Khazanah Nasional berhad (DANGA CAPITAL BHD) Malaysia USD Quasi-SovereignInternational Sep-06Khazanah Nasional Bhd Malaysia USD Quasi-SovereignInternational Jun-07Khazanah Nasional Bhd Malaysia USD Quasi-SovereignInternational Mar-08Khazanah Nasional Bhd Malaysia USD Quasi-SovereignInternational Oct-13Khazanah Nasional Bhd Malaysia SGD Quasi-SovereignInternational Sep-14Khazanah Nasional Bhd Malaysia USD Quasi-SovereignInternational Jan-08Tamweel PJSC UAE USD Corporate International Jan-08The Nakheel Group UAE USD Corporate International May-08The National Central Cooling Company ('Tabreed') UAE AED Corporate Domestic 408 Source: IIFM Sukuk Database 33

43 Khazanah Nasional Berhad - Exchangeable Sukuk ABSTRACT ON KHAZANAH EXCHANGEABLE SUKUK The Khazanah Exchangeable Sukuk is the seventh exchangeable Sukuk offered by Khazanah, providing investors with exposure into China s growing water utility sector by offering the option to exchange Sukuk certificates into shares of Beijing Enterprises Water Group (BEWG). The Sukuk is another one among the growing trend of hybrid or equity-linked Sukuk, which are gaining popularity in the turbulent capital markets. The Khazanah Exchangeable Sukuk, however, is the first ever USD-denominated exchangeable Sukuk, which references a stock that is not Shari ah compliant at issuance. Certificate holders will have the option of cash settlement by the Obligor if the shares do not comply with Shari ah requirements at the time of redemption. Khazanah intends to use the proceeds of the Sukuk as additional working capital and for other general corporate purposes related to its principal business activities. 34

44 Khazanah Nasional Berhad - Exchangeable Sukuk SUKUK SUMMARY Issuer SPV Obligor Wakeel Structure type Issue size Bagan Capital Limited Khazanah Nasional Berhad Khazanah Nasional Berhad Wakalah structure, exchangeable Sukuk USD million Issue Date September 2016 Maturity date September 2021 Tenor Return Fix or Variable Return frequency Pricing = Spread over mid-swaps, Book Runners Listing Rating ISIN Governing Law Five years, with the option of early dissolution by the Issuer at the end of three years It is a zero coupon Sukuk n/a n/a Priced at 43% exchange premium Bank of America Merrill Lynch, CIMB Islamic, Deutsche Bank Labuan International Financial Exchange, Bursa Malaysia, Singapore Exchange Not rated XS English and Malaysian law variously for various documents 35

45 SUKUK STRUCTURE AND CASH FLOWS 36

46 Key Challenges In Sukuk Issuances

47 Key Challenges In Sukuk Issuances 1) Limited availability of tangible assets leads to over reliance on certain Sukuk structures 2) Asset title transfer law particularly for sovereign assets 3) Investor s preference and risk appetite tilted towards balance-sheet risk rather than direct risk on a tangible asset 4) Tax Neutrality 5) Quasi Sovereign Sukuk Implicit and Explicit Government Guarantee 6) Currency & Rate of Return risk mitigation 37

48 Islamic Hedging and its role in Sukuk Market Development

49 Islamic Hedging and its Role in Sukuk Market Development IIFM-ISDA Hedging Standards Tahawwut (Hedging) Master Agreement Islamic Foreign Exchange Forward (IFX Forward) Islamic Cross-Currency Swap (ICRCS) Islamic Profit Rate Swap (IPRS) Islamic Credit Support Deed for Cash Collateral (VM) 38

50 About IIFM

51 About International Islamic Financial Market (IIFM) IIFM is a standard-setting body of the Islamic Financial Services Industry (IFSI) focusing on standardization of Islamic financial contracts and product templates relating to the Capital & Money Market, Corporate Finance and Trade Finance segments of the IFSI. IIFM plays its role in market unification by developing best practices at the global level and achieving Shari ah harmonization through its efforts for creation of a robust, transparent and efficient Islamic finance industry. IIFM also contributes in creating industry awareness by organizing specialized seminars and technical workshops as well as publishing research reports. IIFM was founded in 2002 by the collective efforts of the Islamic Development Bank, Autoriti Monetari Brunei Darussalam (formerly Ministry of Finance Brunei Darussalam), Bank Indonesia, Bank Negara Malaysia (delegated to Labuan Financial Services Authority), Central Bank of Bahrain (formerly Bahrain Monetary Agency) and the Central Bank of Sudan as a neutral and non-profit organization. Besides the founding members, IIFM is also supported by certain regulatory and government bodies such as Indonesia Financial Services Authority, Dubai International Financial Centre Authority, Nasdaq Dubai, State Bank of Pakistan, The National Bank of Kazakhstan, and by a number of international and regional financial institutions active in Islamic finance as well as other market participants. IIFM was formed under Royal Decree No (23) Year 2002 of the Kingdom of Bahrain as a non-profit organization. 39

52 Thank You International Islamic Financial Market (IIFM) Office 72, 7th Floor, Zamil Tower P.O. Box: 11454, Manama, Kingdom of Bahrain Tel: Fax: Website: