The first convertible sukuk in 2 years was issued by Khazanah Nasional at a yield to maturity of -0.5% and no periodic payments. The conversion premium into shares of Chinese retailer Parkson Retail Group) for the sukuk was 30%. Based on today's price of Parkson, was last time the conversion price was seen was at the beginning of 2011. The sukuk was 3.4 times oversubscribed and priced at the lower end of the expected range.
Khazanah has issed a few convertible sukuk to divest itself of several holdings including Telekom Malaysia and well as an exchangeable sukuk for PLUS, a company which operates highways in Malaysia (Khazanah also issued a renminbi-denominated sukuk last year). Both of those sukuk were issued pre-financial crisis (2006 and 2007, respectively). The pricing for the sukuk and the level of interest (from the oversubscription) indicates that the Malaysian sukuk market (at least those from companies connected to the government) continues to be robust.
Showing posts with label Khazanah. Show all posts
Showing posts with label Khazanah. Show all posts
Saturday, March 17, 2012
Tuesday, September 20, 2011
Khazanah's renminbi-denominated sukuk
Malaysian sovereign wealth fund Khazanah is reported to be considering a renminbi-denominated sukuk, the first denominated in renminbi. According to the FT, the sukuk would be focused on investors looking for RMB-denominated assets, rather than primarily at Islamic investors, which is an interesting strategy given that there are many investors holding RMB as a result of trade with China that they have few places to invest since the RMB is not freely convertible.
One part of the article which I find unconvincing is that "Islamic finance lawyers in Hong Kong and Dubai say that even if the offering by Khazanah is successful, the deal may have limited carry-over to the Gulf market, where bonds, to be compliant with Islamic law, often need to be structured differently from sukuk sold to Malaysian Islamic investors".
While there are differences between the Shari'ah standards used in the GCC and in Malaysia, those differences have been narrowing as Malaysia attracts funds and issuers from the GCC into its sukuk market. For example, Al Rajhi Bank and Cagamas launched a sukuk program (Sukuk ALIM) that is acceptable both in Malaysia and in the GCC and a number of GCC-based companies have issued Ringgit-denominated sukuk in Malaysia.
The move into RMB-denominated sukuk will likely be slow because of the newness of that market, but it could provide a way for Islamic issuers to find a new market for their sukuk and introduce the concept to investors who are not already familiar with sukuk. However, this could also be a distraction away from the challenges of developing uniform structures for the basic sukuk structures, which should be the base for growth in the size and liquidity of sukuk secondary markets.
One part of the article which I find unconvincing is that "Islamic finance lawyers in Hong Kong and Dubai say that even if the offering by Khazanah is successful, the deal may have limited carry-over to the Gulf market, where bonds, to be compliant with Islamic law, often need to be structured differently from sukuk sold to Malaysian Islamic investors".
While there are differences between the Shari'ah standards used in the GCC and in Malaysia, those differences have been narrowing as Malaysia attracts funds and issuers from the GCC into its sukuk market. For example, Al Rajhi Bank and Cagamas launched a sukuk program (Sukuk ALIM) that is acceptable both in Malaysia and in the GCC and a number of GCC-based companies have issued Ringgit-denominated sukuk in Malaysia.
The move into RMB-denominated sukuk will likely be slow because of the newness of that market, but it could provide a way for Islamic issuers to find a new market for their sukuk and introduce the concept to investors who are not already familiar with sukuk. However, this could also be a distraction away from the challenges of developing uniform structures for the basic sukuk structures, which should be the base for growth in the size and liquidity of sukuk secondary markets.
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