A sign of market confidence


Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz (pic) said: “The issuance is not only a global first on many fronts but also a strong recognition of Malaysia’s Islamic finance industry’s innovative capabilities in structuring sukuk to help advance Malaysia’s SDG-focused policies towards achieving our Shared Prosperity Vision 2030.”

KUALA LUMPUR: The government has successfully priced the world’s first sovereign US dollar Sustainability Sukuk, via the issuance of US$800mil (RM3.29bil) 10-year trust certificates and also, US$500mil 30-year trust certificates.

In a statement, the Finance Ministry (MoF) said investors’ confidence was clearly reflected in the offering being oversubscribed by 6.4 times.

Due to the overwhelming demand, the government decided to upsize the initial target size of US$1bil to US$1.3bil.

The strong demand has also resulted in the lowest ever yield and spread for a US-dollar sukuk issuance by Malaysia, with the 10-year and 30-year trust certificates priced at 2.07% and 3.075%, respectively.

Both tranches have been assigned a rating of A3 by Moody’s Investors Service and A- by S&P Global Ratings.

“This demonstrates the market’s confidence in Malaysia’s economic recovery and growth prospects, despite a challenging past year due to the Covid-19 pandemic, ” said the MoF.

Proceeds will be used for eligible social and green projects aligned to the United Nation’s Sustainable Development Goals (SDG) Agenda.

According to the MoF, this will enable the country to not only meet its commitments as a signatory to the Paris Agreement but also further its efforts to advance its people’s socio-economic well-being.

The sukuk is also unique as its underlying assets are sustainable assets, being vouchers representing travel entitlement on Malaysia’s Light Rail Transit, Mass Rapid Transit and KL Monorail networks.

As the first sovereign issuance with such assets in a sukuk structure, this issuance sets a new benchmark and reinforces the country’s position as the world’s largest sukuk market.

Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said: “The issuance is not only a global first on many fronts but also a strong recognition of Malaysia’s Islamic finance industry’s innovative capabilities in structuring sukuk to help advance Malaysia’s SDG-focused policies towards achieving our Shared Prosperity Vision 2030.”

The Sustainability Sukuk is issued via a special-purpose vehicle, Malaysia Wakala Sukuk Bhd, and based on a new SDG Sukuk Framework.

The Framework was assessed by Sustainalytics, which has declared it as being aligned with the four core components of the Social Bond Principles 2020, the Green Bond Principles 2018, and the Asean Sustainability Bond Standards 2018.

Both the Framework and Sustainalytics’ Second Party Opinion can be accessed at: https://www.mof.gov.my/en/economy/sustainability.

After a virtual roadshow, the allocation was well-spread globally, with 55% of the principal amount of the 10-year sukuk distributed to investors in Asia, 33% to Europe, Middle-East and Africa (EMEA) and 12% to the United States, while 46% of the principal amount of the 30-year sukuk was distributed to investors in Asia, 33% to EMEA and 21% to the United States.

By investor type, the distribution of the 10-year tranche was 67% to fund managers and insurance companies, 18% to central banks and governments, 14% to banks and 1% to others investors while for the 30-year tranche was 83% to fund managers, 10% to banks, 4% to central banks and governments, and 3% to other investors.

CIMB, HSBC and JP Morgan acted as the joint bookrunners and joint lead managers on this offering. In addition, HSBC Amanah Malaysia and JP Morgan were the joint SDG structuring agents.

The Sustainability Sukuk’s Shariah structure has been approved by the Board Shariah Committee of CIMB Islamic Bank Bhd and HSBC Global Shariah Supervisory Committee.

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