The yield on Malaysia’s five-year ringgit-denominated sukuk declined 33 basis points, or 0.33 percentage point, this year to 3.51 percent yesterday after touching its lowest since March 2009 at 3.5 percent on July 23, according to data from the central bank. Indonesia’s 9 percent rupiah-note yielded a record low 7.08 percent Aug. 4, a drop of 172 basis points this year, prices from Indonesia’s Interdealer Market Association show.
The ringgit is up 8.4 percent against the dollar in 2010, the best-performance in Asia, followed by the rupiah’s 5.2 percent gain, according to data compiled by Bloomberg. Malaysia, the world’s largest Islamic bond market, may post economic growth of as much as 6 percent this year, Prime Minister Najib Razak said May 19. The economy in Indonesia, which has the biggest Muslim population, may expand 5.9 percent, Finance Minister Agus Martowardojo told reporters in Jakarta on July 8.
“Fund managers are looking for opportunities in Asia especially in local-currency terms,” Rohit Chawdhry, who oversees $350 million of assets at Bahrain Islamic Bank, the country’s second-largest Shariah-compliant lender, said in an interview Aug. 3. “Asian currencies will have a strong tendency to appreciate because of the stronger growth fundamentals. You will see there will be a lot of appetite for Asian sukuks and especially local-currency sukuks.”
Islamic bonds, or sukuk, typically pay a share of profits to avoid payment of interest. Malaysia has 269 billion ringgit ($85 billion) of outstanding Islamic bonds, according to data compiled by Bloomberg. Issuance of ringgit sukuk have dropped 48 percent to 9.7 billion ringgit so far this year, the data show. Rupiah-denominated sukuk sales climbed 54 percent to 16.4 trillion rupiah ($1.8 billion) over the same period.
International Holdings
International investors held 96 billion ringgit of local Malaysian debt at the end of June, the most since July 2008, according to the central bank’s website on July 30. Foreigners owned a record 168 trillion rupiah in Indonesia, the finance ministry’s Debt Management Office said on Aug. 3.
The yield difference between the Indonesian sukuk over U.S. Treasuries of similar-maturity narrowed five basis points this week to 5.51 percentage points, according to data compiled by Bloomberg. The yield gap for Malaysian local Islamic bonds widened two basis points to 194.
Global securities that comply with the religion’s ban on interest returned 0.4 percent in the past four days, adding to a 1.2 percent gain in the previous week, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index. The debt has climbed 9 percent in 2010.
Sukuk Spreads
The spread between the average yield for sukuk and the London interbank offered rate narrowed 13 basis points, or 0.13 percentage point, in the last four days to 388, according to the HSBC/NASDAQ index.
The yield on Malaysia’s 3.928 percent dollar-denominated Islamic note due June 2015 climbed four basis points this week to 2.97 percent, according to prices from the Royal Bank of Scotland Group Plc.
The yield on Malaysia’s 3.928 percent dollar-denominated Islamic note due June 2015 climbed four basis points this week to 2.97 percent, according to prices from the Royal Bank of Scotland Group Plc.
Indonesia’s 8.8 percent notes due April 2014 yielded 3.07 percent today, little changed from yesterday, prices from HSBC Holdings Plc showed.
Global sales of Islamic notes fell 29 percent to $7.8 billion so far this year, according to data compiled by Bloomberg. Debt offerings will increase in the second half, led by first-time issuers, because of improved international market conditions, Standard & Poor’s said in a statement on July 28.
Sukuk ‘Pioneers’
“Malaysian and Indonesian sukuk, the pioneers in the industry, have led the market and if Middle East companies sort out their default issues quickly, this will be great for gains and growth,” Sajjad Anwar, who helps manage the equivalent of $160 million at National Fullerton Asset Management Ltd., owned by National Bank of Pakistan, the country’s largest lender, said in an interview from Karachi yesterday.
Dubai World, a state-owned investment company, said on July 22 it’s seeking to close negotiations “in the coming months” on restructuring $23.5 billion of liabilities. Its property unit Nakheel PJSC, which held a separate meeting with lenders July 14, said a group of creditors “unanimously supported” altering the terms on $10.5 billion of loans and unpaid bills.
Dubai World, a state-owned investment company, said on July 22 it’s seeking to close negotiations “in the coming months” on restructuring $23.5 billion of liabilities. Its property unit Nakheel PJSC, which held a separate meeting with lenders July 14, said a group of creditors “unanimously supported” altering the terms on $10.5 billion of loans and unpaid bills.
The average yield on sukuk sold by Gulf Cooperation Council issuers was little changed at 6.54 percent yesterday, and is down 145 basis points for the year, according to the HSBC/NASDAQ Dubai GCC US Dollar Sukuk Index.
Regional Expansion
Emerging economies in Asia will expand 9.2 percent in 2010, outpacing growth of 2.6 percent in developed nations, the International Monetary Fund said on July 7.
Malaysia’s economy is growing after shrinking for the first time in a decade last year. Indonesia’s gross domestic product increased 4.5 percent in 2009.
Sukuk from Asian nations are rallying as borrowers plan $5 billion of sales from the region this year, including Malaysia Airports Holding Bhd.’s 3.1 billion ringgit issuance announced yesterday.
The Philippines’ state-owned Al-Amanah Islamic Bank is exploring a sale of Islamic notes, the lender’s President Armando Samia said in a July 26 interview. State-run Islamic Bank of Thailand plans to raise $155 million, President Dheerasak Suwannayos said in an interview last month.
To contact the reporter on this story: Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
http://www.businessweek.com/news/2010-08-05/ringgit-rally-boosts-sukuk-as-yields-tumble-islamic-finance.html Aug 5, 2010
