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The Bureau of Treasury (BTr) disclosed plans for a benchmark-sized sukuk offering denominated in US dollars with a 5.5-year tenure.
To orchestrate this significant financial endeavour, BTr has appointed major players, including Citigroup, Deutsche Bank, Dubai Islamic Bank, HSBC, MUFG, and Standard Chartered Bank, to conduct fixed-income investor calls across Asia, Europe, the Middle East, and the United States, commencing on Monday (November 27).
Finance Secretary Benjamin Diokno, who earlier expressed the government’s target of raising $1 billion through sukuk bonds, emphasised the move’s role in diversifying financing sources and broadening the investor base.
Market interest is poised to drive heightened bids for the Philippines’ premier sukuk issue. Analysts highlighted favourable global market conditions, including lower US sovereign bond yields and the potential for a cut in Fed rates in 2024, creating an opportune scenario with lower borrowing costs for both issuers and investors — thus creating a mutually advantageous scenario in the evolving landscape of sukuk bonds.
This inaugural sukuk issue marks a significant step for the Philippines.
The basic principle behind Sukuk is that the holder has an undivided ownership right in a particular asset and is therefore entitled to the return generated by that asset.
Similar to investing in bonds, sukuk are diversified and attractively priced instruments with stable returns.
Sukuk issues had seen a huge jump over the years. In 2004, the Sukuk market was valued at $9.6 billion. In 2013, the market topped $269.4 billion, with an exponential growth in the number of large deals and increasing diversification of issuers.
The Islamic finance industry is expected to continue growing at nearly 20 per cent per year, and the pool of investors interested in Shariah-compliant securities is expected to rise along with it.
While Islamic investors are the natural buyers of Sukuk, the appeal of Sukuk now extends far beyond the Islamic world. Some estimates suggest that conventional investors may account for as much as 40 per cent to 60 per cent of any individual Sukuk offering, according to Franklin Templeton Global Sukuk and Mena Fixed Income Strategies.
At end 2022, outstanding global sukuk as maintained double digit growth (+11.2%) to $751. 6 billion, despite global tightening of monetary policy, according Bank Negara Malaysia research.
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