Saudi Sukuk Delay Signals Investor Unease

Institutional names worldwide appear to be resisting an anticipated mega-sukuk to be offered by Saudi Arabia. If successful, the $10 billion sale would be the largest-ever, dollar-denominated Islamic bond offering. The problem is a complex hybrid structure, more commonly understood in Bahrain or Kuala Lumpur, than London or New York. The Kingdom wants to see an enthusiastic reception from major investors in the run-up to the IPO for Saudi Aramco. Yet the proposed mudaraba-murabaha arrangement for the sovereign instrument seems set to land with a thud in global markets. Riyadh should know better; Saudis themselves avoid complexity. The answer to the potential fiasco appears to be restructuring the sukuk along more accepted standards, begging questions about why that was not done in the first place. It would, after all, be embarrassing for Riyadh to see its debut sovereign sukuk falter after its success with an outsized conventional bond last year.

Our Vantage Point: Among global investors, complex structures are out-of-fashion in the post-credit crisis era. That rule-of-thumb applies to both conventional and Islamic transactions.

Learn more at Reuters

© 2017 Cranganore Inc. All rights reserved.
Unauthorized use and/or duplication of any material on this site without written permission is prohibited.

Image: Saudi Arabia needs global investors to plug its budget shortfall. Credit: Eyegelb at Can Stock Photo Inc.

Found Attaché

Bourse Performance

We spotlight the best-performing stock exchanges across emerging markets worldwide.

Top Five
Year-to-Date Through 30 August 2019

Egypt32.6 %
Greece21.9 %
Russia19.5 %
Colombia12.2 %
Thailand9.1 %

Data is shown on a price-return basis in US dollar terms for the broad market index. In this context, we do not report on narrow segments such as China A shares or Russia ADRs. This list excludes performance information on smaller, so-called frontier markets.

Source: MSCI.