Kuveyt Türk planning sukuk debut in Malaysia

LONDON - Reuters

Turkey ‘s Capital Markets Board (SPK) has said Kuveyt Türk is planning to sell sukuk to investors in Malaysia.

Turkish participation bank Kuveyt Türk plans to issue sukuk, or Islamic bonds, in Malaysia aiming to raise as much as 2 billion ringgit ($625.3 million), its first foray into the Southeast Asian Islamic debt capital market.

Kuveyt Türk, 62 percent owned by Kuwait Finance House , will sell the sukuk to qualified investors through its asset-leasing company, KT Kira Sertifikaları Varlık Kiralama, according to Turkey’s Capital Markets Board.

No timeframe was given for the deal. The last time Kuveyt Türk was last in the market was in June, when it issued a $500 million five-year sukuk that attracted over $3.25 billion in orders.

In July, Turkiye Finans became the first Turkish lender to issue ringgit-denominated sukuk in Malaysia when it raised 800 million ringgit ($252.2 million) from a 3 billion ringgit programme it set up in June.
An accommodative tax regime and strong demand from local investors have made Malaysia an attractive market for issuers from across Asia and the Middle East.

In June, Bank of Tokyo-Mitsubishi UFJ, Japan’s largest lender, set up a $500 million multi-currency sukuk programme in Malaysia.

Malaysia has the world’s largest and most liquid sukuk market, accounting for two-thirds of total sukuk issuance, but authorities are keen to internationalise its Islamic capital marketswhich remains dominated by local-currency deals.

 Year-to-date sukuk issuance in Malaysia has reached the equivalent of $61.6 billion through 325 deals, compared to $53.6 billion through 435 deals in the same period last year, according to data from Zawya, a Thomson Reuters company.

The emergence of corporate sukuk in Turkey is seen as a litmus test for efforts to develop Islamic finance by the government, which issued a maiden $1.5 billion sovereign sukuk in 2012 to encourage the industry’s development.

The global sukuk market is growing fast, with year-to-date issuance up 16.3 percent from last year at $88.9 billion, according to Zawya, a Thomson Reuters company.

But the market remains reliant on sovereign and quasi-sovereign issuers, which represent a combined 77 percent of the total. Most corporate sukuk come from Malaysia, so issuers from Turkey could help deepen the market.