Saudi Arabia's government made its first offer of riyal-denominated Islamic bonds to investors on Sunday, auctioning sukuk with maturities of five, seven and 10 years, a document seen by Reuters showed.
Riyadh is launching a domestic sukuk issuance programme to help cover a large budget deficit caused by low oil prices.
Five-year sukuk were offered at yields in a range of 2.90 to 3.00 percent, seven-year at 3.25-3.35 per cent, and 10-year at 3.55-3.65 pe rcent. Investors have until 2pm local time on Monday to submit bids.
The ministry did not give the amount of sukuk that it aimed to sell, but Saudi commercial bankers said they expected an issue of about 10 billion Saudi riyals (Dh9.79bn), which the market could cope with easily since liquidity had improved since last year and investors had been preparing for the issue.
Saudi Arabia’s ministry of finance said earlier on Sunday it has launched an “unlimited” programme for selling Saudi riyal-denominated sukuk, or Islamic bonds, as the kingdom steps up efforts to plug its budget shortfall caused by lower oil prices.
“The terms and conditions of each issuance will set out the details of such issuance including, but not limited to, the types of eligible investors, the size of the issuance and the expected return,” the ministry said on its website.
The ministry also plans to list the sukuk locally and has submitted the sukuk programme to market regulator, the Capital Market Authority, for approval, and to help to develop the local domestic debt market.
The ministry revealed earlier this month the names of 13 local banks that have qualified to take part in the sukuk programme.
In April, Saudi Arabia sold thi syear US$9bn worth of international sukuk, its first foreign sale of Islamic bonds.
The Saudi government put on hold in October last year the sale of domestic conventional bonds after it sold $17.5bn international bond, the biggest by an emerging market nation.
Prior to the international sale, the government was selling 20bn riyals (Dh19.6bn) of bonds to banks each month since mid-2015 to help finance its budget deficit.
The government is forecasting a budget deficit of 198bn riyals for 2017, compared with an actual deficit of 300bn riyals last year.
S&P Global Ratings expects sukuk sales this year to range between $75bn and $80bn, higher than its previous estimate of $60bn to $65bn, as more governments tap the fixed income market for their funding needs. This year’s sales will be exceptional and are unlikely to be repeated next year, the agency said.
Governments, which last year primarily tapped conventional debt markets, are seeking to diversify their investors’ base this year with sukuk sales.
The rating agency forecast that Arabian Gulf governments’ financing needs will reach $275bn between this year and 2019. About 50 per cent of that figure will be met from fixed income markets issuances, with a preference for conventional bonds over sukuk, it added.
With Reuters
England Test squad
Joe Root (captain), Moeen Ali, James Anderson, Jonny Bairstow (wicketkeeper), Stuart Broad, Jos Buttler, Alastair Cook, Sam Curran, Keaton Jennings, Dawid Malan, Jamie Porter, Adil Rashid, Ben Stokes.
The specs: 2018 Jaguar F-Type Convertible
Price, base / as tested: Dh283,080 / Dh318,465
Engine: 2.0-litre inline four-cylinder
Transmission: Eight-speed automatic
Power: 295hp @ 5,500rpm
Torque: 400Nm @ 1,500rpm
Fuel economy, combined: 7.2L / 100km
The biog
Name: Marie Byrne
Nationality: Irish
Favourite film: The Shawshank Redemption
Book: Seagull by Jonathan Livingston
Life lesson: A person is not old until regret takes the place of their dreams
MATCH INFO
Champions League quarter-final, first leg
Ajax v Juventus, Wednesday, 11pm (UAE)
Match on BeIN Sports
TOUR DE FRANCE INFO
Dates: July 1-23
Distance: 3,540km
Stages: 21
Number of teams: 22
Number of riders: 198
UAE tour of the Netherlands
UAE squad: Rohan Mustafa (captain), Shaiman Anwar, Ghulam Shabber, Mohammed Qasim, Rameez Shahzad, Mohammed Usman, Adnan Mufti, Chirag Suri, Ahmed Raza, Imran Haider, Mohammed Naveed, Amjad Javed, Zahoor Khan, Qadeer Ahmed
Fixtures: Monday, first 50-over match; Wednesday, second 50-over match; Thursday, third 50-over match
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.”
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
