Dubai: Dubai Financial Market (DFM ) announced the listing of $750 million (Dh2.8 billion) sukuk for the Government of Dubai on Wednesday.
“The listing underlines the accelerating pace of efforts aimed at reinforcing Dubai’s position as the capital of Islamic economy and global sukuk centre. Dubai is the world’s third largest venue for sukuk listings and this listing raises the total value of sukuk listed on Dubai capital markets to $20.38 billion,”.
The 15-year issue matures in 2029. The new issue will be OTC (over the counter) traded and settled through Clearstream and Euroclear, not DFM.
While the listing of Government debt issue has come as boost to the total value of sukuk listed on the local market, it has improved the credibility of Dubai capital markets as an alternative to other leading international sukuk listing venues.
Dubai’s Global Sukuk Centre was launched in February 2013 as part of the 46 initiatives of the Dubai Islamic Economy Strategy. Since then a number of big ticket sukuk issuances have been listed on the Dubai markets.
While the issuance of a benchmark sized sukuk by the Government and its listing on the DFM has come as a boost to the Islamic capital market development in Dubai. Analysts say the issue has come a pointer to the improving fiscal position and fund raising capability of Dubai government which will be reflected in the credit standing of government related entities.
Investor confidence
“Dubai sovereign debt appears to be stabilising, in line with our view that the growth recovery would ease deleveraging trends at the sovereign level,” said Jean-Michel Saliba Middle East and North Africa Economist at Bank of America Merrill Lynch (BofA Merrill Lynch).
The pricing of the $750 million 15-year sukuk priced at 5 per cent, at the lower end of guidance also point to the improving investor confidence in Dubai.
While the issue got over subscribed three times, its ability to attract regional liquidity is seen as a sign of growing appetite for sukuk investing in the region. About 61 per cent of investors in the sukuk came from the Middle East, 17 per cent from Britain and 10 per cent from the rest of Europe, according the Dubai Department of Finance.
According to a recent report from Standard & Poor’s a high proportion of investors for international sukuk issuances came from the Middle East and Asia. Of these investors 36 per cent were from the Middle East and 22 per cent from Asia. The remaining investors were mainly from Europe (16.8 per cent) or the US (12.3 per cent).
