Sunday, January 15, 2012

Could Tadawul become a regional sukuk trading center?

My earlier post on the expected $4 billion sukuk from the Saudi aviation authority GACA seems like it could be of even greater significance if the new rules allowing foreign investors to invest directly on the Tadawul exchange.  Currently the Tadawul sukuk and bond market has 7 listed sukuk from 4 issuers with a total size issued of SAR34.5 billion ($9.2 billion).

A sovereign sukuk (the GACA sukuk is guaranteed by the Ministry of Finance) with an issued size of SAR15 billion ($4 billion) would increase the total value of sukuk eligible for trading by nearly 50%.  If foreign investors were able to invest in sukuk directly through the Tadawul, and if foreign issuers were able to list their sukuk on Tadawul, it could create additional liquidity for sukuk, which is growing, but is still limited.

UPDATE: The activity on the Tadawul Sukuk and Bond Market for 2011 was very small (see Annual Report 2011, page 45 [pdf]).  On average, there was 1 transaction every 5 trading days (49 trades in 248 trading days) and the total volume was SAR1.8 billion ($480 million).

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