Thursday 2nd July 2015
NEWS TICKER: THURSDAY, JULY 2nd 2015: Deutsche Börse says a new iShares ETF from BlackRock's product offering has been launched on Xetra and Börse Frankfurt today. The iShares MSCI EMU USD Hedged UCITS ETF launched on Xetra ETF provides access to euro-zone equities with currency hedging against US dollar. The exchange organisation says the ETF enables investors to participate in the performance of stock corporations in the euro zone while also benefiting from currency hedging against the US dollar. This protects investors against an appreciation of the US dollar against the euro. - The Straits Times Index (STI) ended 3.3 points or 0.1% lower to 3327.84, taking the year-to-date performance to -1.11%. The top active stocks today were UOB, which gained 0.82%, DBS, which closed unchanged, Singtel, which declined 0.24%, CapitaLand, which declined 1.13% and Global Logistic, with a 0.78% fall. The FTSE ST Mid Cap Index declined 0.06%, while the FTSE ST Small Cap Index rose 0.02%. The outperforming sectors today were represented by the FTSE ST Basic Materials Index, which rose 0.82%. The two biggest stocks of the Index - Midas Holdings and NSL- ended 1.59% higher and 0.67% lower respectively. The underperforming sector was the FTSE ST Real Estate Investment Trusts Index, which slipped 0.67%. CapitaLand Mall Trust shares declined 2.30% and Ascendas REIT declined 2.41% - According to Flightglobal, China’s state aviation supplier has tentatively signed for up to 75 Airbus A330s in an agreement which will help bridge a production gap to the re-engined A330neo. General terms of the agreement inlcude an order for 45 jets plus a memorandum of understanding for another 30 options. The deal took place during an official visit to France by Chinese premier Li Keqiang. Airbus has long been negotiating the landmark agreement following a preliminary deal to establish an A330 completion centre in Tianjin. The pact with China Aviation Supplies Holding, which is likely to include several aircraft configured in the lower-weight regional version. Meanwhile, Airbus CEO Fabrice Bregier says the package is a “new vote of confidence” in the twinjet. “China is today the most important market for aviation in the world,” he adds - Morningstar has upgraded the Royal London UK Equity Income fund to a Morningstar Analyst Rating of Silver. The fund was previously rated Bronze. Experienced manager Martin Cholwill has, over his decade-long tenure on the fund, consistently applied his proven investment process to good effect. His strategy is sensible for delivering yield and competitive total returns for investors, with a focus on free cash flows and valuations. The fund also enjoys a cost advantage over its rivals, with ongoing charges lower than the category norm. These factors have led to a strong and consistent performance profile over a number of years - The amount of outstanding Euro commercial paper (CP) and certificates of deposit (CD) declined significantly in the week ending July 1st, according to CMDPortal data. Outstandings dropped by $11.80bn to $861.59bn during the week. Sovereign, supranational and agency CP outstandings dropped by $2.80bn to $219.44bn. Corporate CP outstandings declined the most during the week by $5.56bn to $89.83bn. Meanwhile financial CP outstandings declined by $3.04bn to $503.37bn - SWIFT says that BTG Pactual, one of Latin America’s largest financial services firms, has joined the Know Your Customer (KYC) Registry, a centralised repository that maintains a standardised set of information about correspondent banks required for KYC compliance. For the KYC Registry, banks contribute an agreed ‘baseline' set of data and documentation for validation by SWIFT, which the contributors can then share with their counterparties. Each bank retains ownership of its own information, as well as control over which other institutions can view it - Laurel Powers-Freeling is to join the board of Atom, the UK’s newest bank, as its senior independent non-executive director. The appointment comes hot on the heels of Atom’s announcement that the Prudential Regulation Authority and the Financial Conduct Authority have approved its digital business model. Powers-Freeling was recently appointed as Chairman of Sumitomo-Mitsui Banking Corporation Europe - China has guaranteed that 100% foreign-owned firms (typically known as WFOEs – Wholly Foreign-Owned Entities) will be able to manufacture and market their own products for sale to mainland clients, operating under exactly the same rules as local private funds. The announcement comes at the end of the US-China Strategic and Economic Dialogue, which appears to have resulted in unprecedented rights for foreign firms participating in China’s financial markets. Greater access to China’s Interbank Bond (IBB) market has also been granted, with the elimination of firm-level ownership quotas in addition to improved access and operating rights for foreign banks. Finally, Shanghai’s Free Trade Zone (FTZ) has been specified as the testing ground where foreign owners can establish wholly-owned futures companies with access rights to domestic exchanges. China’s opening-up to foreign asset managers is now moving faster than our most optimistic predictions. With that speed in mind, we predict that all of the above opportunities will be available to foreign owners by the end of 2015.

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Investors pile into Islamic bonds

Wednesday, 23 May 2012
Investors pile into Islamic bonds April and May looked to be banner months for sukuk. Two deals, one from the Saudi Electricity Company (SEC) and the other, from Banque Saudi Fransi, the Saudi lender part-owned by Credit Agricole, marked two rare but popular US dollar denominated issues which were highly prized by investors. The benchmark deals helped underscore growing investor appetite for Islamic bonds. http://www.ftseglobalmarkets.com/

April and May looked to be banner months for sukuk. Two deals, one from the Saudi Electricity Company (SEC) and the other, from Banque Saudi Fransi, the Saudi lender part-owned by Credit Agricole, marked two rare but popular US dollar denominated issues which were highly prized by investors. The benchmark deals helped underscore growing investor appetite for Islamic bonds.

Saudi Fransi, Saudi Arabia’s fifth largest bank, launched $750m five-year Islamic bond mid-month at par amid strong investor demand for the issue in mid-May. The issue is the bank’s first sukuk sale under a recently-established $2bn debt programme. The sukuk came in at a spread of 185 basis points (bps) over midswaps, at the lower end of its ­indicated range. Initial price guidance was 200bps over midswaps. The deal was heavily oversubscribed, attracting investor orders worth $4bn, under­scoring growing investor appetite for sukuk issuance. The sukuk carries a profit rate of 2.947%. Citi, Deutsche Bank and Credit Agricole were arrangers on the deal.

The deal marks the second dollar denominated sukuk emanating from the Kingdom so far this year. Saudi Electricity’s $1.75bn sukuk, issued three weeks earlier, raised the bar with some $17.5bn in investor orders.  The Saudi Electricity Company (SEC), which is rated A1/AA-/AA- all Stable, is the largest utility in the GCC. The issue was made up of a five year $500m tranche and a $1.25bn ten year element. The ­transaction was led by Deutsche Bank and HSBC marked the inaugural ­international sukuk issuance by SEC and the largest international debt capital markets issuance out of Saudi Arabia for some years. The issuer also wanted to achieve a long tenor bond supported by a diversified investor base, which the arrangers helped secure after a comprehensive global road show. The dual-tranche Sukuk transaction was well received globally and generated a large order book with over 440 investors placing orders.



Shortly after the issue the SEC’s chief executive Ali Al Barrak explained, “The sukuk issue is important to us for strengthening our funding mix, accessing longer-tenor financing, broadening our investor base and helping us become more in line with our global peers while supporting SEC’s capital expenditure requirements.”

Saudi Arabian dollar-denominated bonds come to market relatively infrequently, and attract substantial demand when they do; illustrating that Gulf issuers are benefiting from their own economic micro-climate and are providing something of an oasis for investors starved of comprehensive corporate issuance opportunities. 

Investor appetite for the deals was marked and might just be a sign of a growing preference for Islamic instruments. The evidence is still thin: however Banque Saudi Fransi’s existing $650m conventional bond, which carries interest of 4.5% and matures in 2015, was bid at just over 103.97 in the second week of May, to yield about 2.8%, coming under some selling pressure ahead of the new issue.

Also in mid May Islamic Development Bank (IDB) enhanced the size of its medium term notes (NTN) ­programme from $1.5bn to $3.5bn, which will be issued in both London and Kuala Lumpur. The IDB’s forthcoming medium term sukuk (which is expected to range between five and seven years) will be issued under this programme sometime in June and is expected to raise between $750m and $1bn. Funds will be used to provide blended credits in support of capital goods projects in member countries. IDB, which is AAA-rated, priced a $750m five-year sukuk last May at a spread of 35bps over midswaps to yield 2.35%. According to local Saudi press reports, the sukuk will be 144a-compliant and, therefore, open to investors from the United States; though the IDB did not respond to questions about its forthcoming issue. 

Elsewhere, bond traders expect the first restructuring of an Islamic bond.  United Arab Emirates’ Dana Gas, the Sharjah-based energy company, is expected to restructure its $920m sukuk in coming weeks as investor concerns have heightened over the ability of the utility to meet its payment ­commitments. Up to now no Islamic bonds have been renegotiated though there have been examples of outright defaults (in both Saudi Arabia and Kuwait).

Dana has reportedly hired Blackstone, Latham Watkins and Deutsche Bank to advise on the various options for repaying the sukuk. The company is “committed to finding a consensual solution that is equitable to all stakeholders”, it said in a statement to the Dubai stock exchange.

Meantime, the Central Bank of Bahrain (CBB) says its monthly issue of the short-term Islamic leasing bonds, Sukuk Al-Ijaara, has been oversubscribed by 175%. Subscriptions worth BD35mwere received for the BD20m issue, which carries a maturity of 182 days. The expected return on the issue, which matures in mid-November 2012, is 1.34%.

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