ICG Events

Sukuk Opportunities Beckon in Europe, Malaysia & Saudi Arabia as Market Set to Increase Substantially in 2nd Half of 2010

The global Sukuk market is back on track and both issuers and investors are confident that the number of issuances will markedly increase during the second half of 2010 going into 2011.

The global Sukuk market is back on track and both issuers and investors are confident that the number of issuances will markedly increase during the second half of 2010 going into 2011.

The two major trends that have emerged during this year thus far is the adoption of tax neutrality and other enabling laws to facilitate the issuance of Sukuk in four of the five most important jurisdictions in the European Union (EU), namely the UK, Luxembourg, France and Ireland (with Germany being the only exception currently), and exciting new market developments in Malaysia and Saudi Arabia.

The race to issue the world's first EuroSukuk, most likely a benchmark issuance, will almost certainly be between the UK and Luxembourg, although France may be the darkhorse issuer. Both the Conservatives and the Liberal Democrats have expressed their desire to continue the Labour Government's initiative on Islamic Finance and to promote London as a global Islamic finance centre.

The new Conservative-Liberal Democrat coalition government, headed by Prime Minister David Cameron, may indeed step up moves to issue a debut sovereign Sukuk to finance a selective infrastructure or transport project especially since the Sukuk issuance would be off balance sheet financing and would not compromise or undermine the Government's stated policy of reducing the UK's burgeoning budget deficit.

At the same time, Luc Frieden, the Finance Minister of Luxembourg, confirmed in London last week that his government considers Islamic Finance as an integral part of the Duchy's financial services offerings, and stressed that while the government did not plan to issue a sovereign Sukuk soon, it was considering the idea of a debut Sukuk issuance and he "would not exclude the issuance of a Sukuk by Luxembourg". Similarly, French President Nicolas Sarkozy has also expressed his desire to develop France as an Islamic Finance hub in Europe, but market players are keen to see a more proactive approach from Paris.

The other development is the imminent entry of Alrajhi Bank of Saudi Arabia, the world's largest Islamic bank in terms of assets and capital, into the Sukuk market with a strategic alliance made in heaven. Alrajhi Bank is teaming up with Cagamas Berhad, the National Mortgage Corporation of Malaysia, the largest issuer of Islamic mortgage securities in the world, to jointly issue during June 2010 what the two promoters claim will a "first-of-its kind" Sukuk.

With these encouraging developments, ICG Events are organizing the 2010 London Sukuk Summit, the fourth successive summit in the series, along the theme 'Harnessing Opportunities for Islamic Capital Market Products in Europe and Beyond' in London on the 9th-10th June 2010.

The Summit has once again attracted the participation of distinguished players in the market including Prof. Rifaat Abdel Karim, Secretary General of the Islamic Financial Services Board (IFSB); Michael Essex, Head

of Middle East and North Africa, International Finance Corporation (IFC); Gillian Walmsley, Head of Fixed Income Products, London Stock Exchange; and senior executives from PricewaterhouseCooper, Theisen Associates, Liquidity Management House, CIMB Islamic Bank, Ashurst LLP, Islamic Corporation for the Insurance of Export Credit and Investment, Gatehouse Bank, the Islamic Development Bank et al.

The timing of the Summit could not be more opportune and follows on from the highly successful inaugural London Sukuk Summit along the theme 'Strategies for Today; Demystifying Islamic Capital Market Products' held in June 2007; the equally successful follow-up London Sukuk Summit in June 2008 along the theme 'Gearing up for UK Sukuk Originations'; the third successive Summit in June 2009 along the theme 'Innovating for the Future: The Next Generation of Post Credit Crunch Sukuk Structures/Preparing for the Next Wave of ICM Offerings'; and the inaugural and well-attended Asia Sukuk Summit 2009 along the theme 'Towards a New Silk Route for Islamic Finance' held on 19th-20th February 2009 in Hong Kong.

There have, of course been numerous other positive developments in the global Sukuk sector which underpin the above market optimism. These include:

i) In Malaysia, Cagamas has thus far in 2010 issued RM2.3 billion of Sukuk and Islamic debt securities,
ii) The successful redemption on schedule by Dar Al-Arkan Real Estate Development Company (DAAR), a leading residential real estate developer and provider of Shariah-compliant housing finance in Saudi Arabia, of its inaugural landmark 3-year US$600 million Sukuk issued in March 2007 by DAAR International Sukuk Company,
iii) The oversubscription of DAAR fourth Sukuk issuance - a US$450 million Ijara Sukuk which closed in February 2010 and which was lead arranged by Unicorn Investment Bank, Deutsche Bank and Goldman Sachs,
iv) The oversubscription (by four times) of the SR725 million publicly-listed Mudaraba Sukuk issued by Saudi Hollandi Bank to raise Tier-II capital for the Bank and jointly lead managed by Riyad Capital and Saudi Hollandi Capital,
v) The recent successful closing of the US$100 million Al-Hilal Sukuk issued by the International Finance Corporation (IFC), the private sector funding arm of the World Bank Group,
vi) The highly successful debut 5-Year US$500 million issuance by GE Capital, the finance arm of General Electric of the US, whose proceeds will be used for general corporate and balance sheet purposes.
vii) The successful restructuring of a number of Sukuk issued in Dubai and the recent timely repayment of installments due in April and May 2010 thus further boosting market confidence.

Perhaps the most ringing endorsement of the prospects for the Sukuk market comes from Kathy Cassidy, GE's Senior Vice President and Treasurer, who stressed that the company's recent Sukuk transaction "is strategically important for GE as it establishes yet another way of raising funds from an important investor base. We have been focused on diversifying our alternative funding sources to include global deposits and

covered bonds, and transactions such as the Sukuk allow us to make progress in meeting our objectives. We intend to be regular issuers in the Sukuk market and are heartened by the support we have seen in this first transaction."

The Islamic capital markets is indeed poised to play an important role in the next stage of development of the global Islamic finance sector per se which has better withstood the vagaries of the credit crunch and the global financial market.

The challenge is to consolidate these Islamic Capital Markets and Sukuk structures and to come up with even more imaginative and economically productive structures and products. The market developments are indeed increasingly underpinned by progress in enabling regulation, legislation, innovation, Shariah governance, diversification and market education.

The 2010 London Sukuk Summit is specifically aimed at harnessing these developments to keep you informed about the Sukuk market developments and innovation; to provide a platform for dialogue with your peers; and to give you a voice in contributing to the future direction of the Islamic debt and capital markets. Can you afford to not to be part of this informative, inspiring and imaginative process!

For further information, please contact: info@icg-events.com or visit the event website: www.sukuksummit.com

Categories: Finance, Business Finance

Tags: Banking, finance, Islamic Banking

About ICG Events

View Website

Nazia Khanam
ICG Events

020 8200 9002
ICG Events
First Floor, Albion House
470 Church Lane