Capital Markets

Saudi Sukuk 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.

© 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.

Featured Selection

Fundamentals of Islamic Finance and Banking
Syeda Fahmida Habib

Sed ut perspiciatis unde omnis iste natus error sit voluptatem accusantium doloremque laudantium, totam rem aperiam, eaque ipsa quae ab illo inventore veritatis et quasi architecto beatae vitae dicta sunt explicabo. Nemo enim ipsam voluptatem quia voluptas sit aspernatur aut odit aut fugit, sed quia consequuntur magni dolores eos qui ratione voluptatem sequi nesciunt.

Button

By using the button to purchase this book on amazon.com, you help to keep our content free for all. There is no direct cost to you. We appreciate the anonymous signal of encouragement.

Compliance Matters

Advertising Notice

The website sponsor is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.

Take-Away Wisdom

We offer insight on a selection of recently-published books that are relevant to Islamic finance and halal industry.

Books at Mosque