Nasdaq Dubai has joined a Tunisian government task force to prepare the North African country for its first sukuk issuance.
The move comes a month after the signing of an agreement between the exchange and Bourse de Tunis for future collaboration on listings and Islamic finance solutions.
Nasdaq Dubai said yesterday that the task force is considering commercial, legal and regulatory issues to help the country create a solid framework for capital-raising through selling Islamic bonds to domestic and international investors.
The task force includes Tunisian members from the head of government’s office, the ministry of finance, the ministry of development, the central bank, financial market council and Bourse de Tunis.
“The task force will work speedily and thoroughly to help us create robust infrastructure for sukuk issuance that will give the government and Tunisian private sector a valuable new tool for raising capital,” Bilel Sahnoun, the chief executive of Bourse de Tunis, said in a Nasdaq Dubai statement. “Tunisia’s entry into the sukuk sector will promote international and domestic investment and confidence in our economy that will help to fund our national growth and development.”
Lamia Zribi, the country’s finance minister, said in January that Tunisia planned a sukuk issuance of about US$500 million this year, as part of about $2.85 billion in external financing for the year.
“Tunisia’s commitment to issuing sukuk will play an important role in the continuing global expansion of the sector, as more countries and more investors make use of its benefits as an effective Sharia-compliant capital markets tool,” said Hamed Ali, Nasdaq Dubai’s chief executive.
Nasdaq Dubai, at the Dubai International Financial Centre, is two-thirds owned by the Dubai Financial Market (DFM), the onshore bourse. Nasdaq Dubai has 63 sukuk listings with a total nominal value of $51.6bn, while the DFM has three listings with a value of $2.15bn, making Dubai the world’s largest sukuk-listing venue by value, according to Nasdaq Dubai.
Globally, the market for sukuk is expected to remain stable this year at between $60bn and $65bn, S&P Global Ratings said in January.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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