Global Sukuks’ Stretched Stakes
Malaysia’s Islamic Finance Center reported a 15 percent quarterly global bond drop to $30 billion in April although that pace has been about the average since 2012 as annual issuance should again top $100 billion with sovereign debuts from Hong Kong and South Africa already in course. In Q1 the Islamic Development Bank and Liquidity Management Corporation were benchmark short and long-term sponsors and the Maldives completed a pilot. Malaysia continued to source two-thirds of instruments with Asian and GCC names increasingly tapping the ringitt market. In the Gulf number two space UAE and Saudi volume slipped while the central banks in Bahrain and Qatar increased their supply of Shariah-compliant paper. Sovereigns and quasi-sovereigns represent 80 percent of the total at $25 billion as corporate sukuks were down by half to $5 billion due largely to the US Fed’s post-tapering yield spike. By sector financial services dominate with a 25 percent share as banks try to meet Basel III capital ratios, followed by the energy industry’s 10 percent. By currency the dollar ranks second but Indonesia’s rupiah is close behind at 8 percent of placements. The global amount outstanding is now $275 billion, with the Gulf portion at $85 billion, according to the tracker. Performance was “heterogeneous” in the first three months as yields came down less than 100 basis points in Malaysia and the GCC but rose 75 basis points for Turkey’s 2014 offering. For the reminder of the year, Mauritania, Senegal and Tunisia are slated to enter as non-Muslim economies like Luxembourg and the UK also join the “fast growing segment,” the MIFC predicts.
Egypt had planned this route to tap Middle East investors but instead received $12 billion in aid the past six months, half in grants and oil, following the ouster of Muslim Brotherhood President Morsi, who remains on trial after hundreds of supporters rounded up were recently sentenced to death. The junta’s head, General Al-Sisi declared his candidacy for the May elections and so far is only opposed by veteran activist Sabahi who came in third in 2012. Foreign reserves have held at $17 billion and the pound at 7/dollar with local T-bill yields still in double digits. The fiscal deficit was at 7 percent of GDP with the outside infusion as the government will raise selected fuel prices as it tries to pay $5 billion in arrears to foreign suppliers. On the heels of pre-poll stimulus programs the Finance Minister admitted the gap could hit 15-20 percent without reforms, especially as tourism revenue was off 40 percent to $1.5 billion in the first quarter after an attack in Taba raised security warnings. Despite debt/GDP at 75 percent and human rights and democratic reservations, dedicated investors in a Reuters survey had a large overweight after a 15 percent stock market gain through April. The UAE after a higher surge was seen as overvalued as it is promoted to the core universe and attempts quantitative and qualitative compliance.
