Malaysian Islamic Banks Dominated Sukuk Issuance In 1H 2014

Islamic financial institutions (FIs) drove the Malaysian bond and sukuk markets in 1H 2014. With Am Islamic Bank paving the way with the issuance of the world’s first Basel III-compliant Tier-2Sukuk Murabahah in February, a host of RAM-rated Malaysian Islamic FIs – such as Maybank Islamic, Public Islamic Bank and Hong Leong Islamic Bank – have been tapping the domestic sukuk market for very competitively priced funding. Driven by this, the Malaysian bond market remained focused on Islamic finance in 1H 2014, with a strong showing in sukuk issuance- representing 73% of the overall corporate bond market in the same period – grossing RM42.2 billion[1] of new issues.

In the last few years, the Malaysian bond market has welcomed innovative Shariah-compliant structures and foreign issuers tapping the Malaysian sukuk market for the first time. This has provided the necessary breadth and depth of credits and sukuk instruments to the market. “RAM also has the distinction of having rated Turkiye Finans Katilim Bankasi AS (jointly lead-managed by HSBC Amanah Malaysia Berhad and Standard Chartered Saadiq Berhad) – the first Islamic bank in Turkey to tap the Malaysian sukuk market this year through its RM3.0 billion Sukuk Murabahah MTN Programme .” highlights Foo Su Yin, RAM Ratings’ CEO . Other notable landmark issuers in 1H 2014 include Etiqa Takaful Berhad, Malaysia’s largesttakaful operator, which issued its Subordinated Sukuk Musharakah Facility of up to RM300 million (lead arranger: Maybank Investment). At the same time, Malaysian states also benefited from sukuk financing; the Sarawak State Government tapped the market through its inaugural RM1,500 million Sukuk Murabahah programme (lead arranger: RHB Investment Bank).

RAM anticipates the corporate bond market to gather momentum in 2H 2014. Malaysia’s better-than-expected 6.3% GDP growth in 1H 2014 (1H 2013: 4.4%) should encourage potential issuers to seek funding for business expansion and investment activities. In this respect, the bond and sukuk markets are still very viable for many corporates seeking to lock in rates before a second OPR increase, widely expected to take place either by end-2014 or in 1Q 2015 . We envisage a gross issuance of between RM90 billion and RM95 billion for 2014, led by a number of new infrastructure and utility projects that are anticipated to come on-stream soon, as well as the funding needs of ongoing Economic Transformation Programme initiatives.

Zooming in on the Lead Managers’ League Table for 1H 2014, Maybank Investment Bank Berhad emerged as the most prolific lead manager for the third consecutive time (based on performance in the first half of the year). It maintained its dominance in terms of programme size and number of issues for both conventional and sukuk issuance. Hong Leong Investment Bank took a relatively close second place, after having arranged the RM10 billion Senior MTN Programme of sister company Hong Leong Bank.

The RAM League Tables list lead managers by the value and number of deals for all RAM-rated bonds. Credit is given to the entire debt programme regardless of the type of instrument, as long as the debt had been issued during the period, either in full or in part. Please refer to our website for further details on the criteria for the RAM League Tables.

Originally published on www.zawya.com