- Published on
KembaraXtra – Islamic Finance – Sukuk: Ṣukūk Issued in Various Currencies
Overview
Ṣukūk can be issued in different currencies, depending on the issuer’s funding strategy and the target investor base. Issuing Ṣukūk in multiple currencies allows issuers to diversify funding sources, access new markets, and match financing needs with currency exposure.
US Dollar as the Traditional Currency
• The US Dollar (USD) has historically been the dominant currency for international Ṣukūk.
• Reasons include:
• High global liquidity,
• Wide international investor acceptance,
• Benchmark status in global capital markets.
Implication:
USD Ṣukūk are attractive to international investors seeking stable, widely traded instruments.
Expansion into Other Currencies
To broaden investor reach, issuers have increasingly issued Ṣukūk in non-USD currencies, especially in:
• Malaysian Ringgit (MYR), and
• Chinese Yuan (RMB).
This strategy helps:
• Attract regional investors,
• Reduce reliance on USD funding,
• Tap into deep domestic liquidity pools.
Examples of Yuan-Denominated Ṣukūk
• Khazanah Nasional Berhad
• Issued a 500 million yuan Ṣukūk in 2011,
• Marked one of the earliest RMB Ṣukūk issuances.
• Axiata Group Berhad
• Issued a two-year, 1 billion yuan Ṣukūk in September 2013,
• Demonstrated corporate appetite for non-USD Islamic financing.
Significance:
These issuances helped connect Islamic finance with China’s capital markets.
Ringgit-Denominated Ṣukūk by Gulf Issuers
Malaysia’s Islamic capital market is one of the most liquid globally, attracting foreign issuers—particularly from the Gulf region—to issue ringgit-denominated Ṣukūk.
Notable Examples
• Mumtalakat Holding Company
• Issued a 20-year RM 3 billion Murābaḥah Ṣukūk programme (October 2012).
• Abu Dhabi National Energy Company
• Issued a 20-year RM 3.5 billion Murābaḥah Ṣukūk programme (March 2012).
• Gulf Investment Corporation
• Issued a 20-year RM 3.5 billion Ṣukūk programme (March 2011).
Why Malaysia?
• Strong regulatory framework,
• Large institutional investor base,
• Well-developed Sharīʿah governance
Domestic Currency Ṣukūk Issuances
In addition to international issuances, Ṣukūk are frequently issued:
• By domestic issuers,
• In the local currency,
• Targeting resident investors.
Key Characteristics
• Governed by domestic regulations and tax rules,
• Used to:
• Tap local market liquidity,
• Support domestic financial market development,
• Reduce foreign exchange risk.
Example:
A government issues local-currency Ṣukūk to finance infrastructure using domestic savings.
Why Issuing Ṣukūk in Multiple Currencies Matters
• For issuers:
• Diversifies funding sources,
• Matches revenue and financing currencies,
• Lowers dependency on a single market.
• For investors:
• Provides currency diversification,
• Offers access to foreign Islamic investment opportunities.
Simple Exam-Friendly Summary
• USD has traditionally dominated international Ṣukūk issuances.
• Issuers increasingly use MYR and RMB to expand investor reach.
• Malaysian markets attract many foreign issuers.
• Domestic-currency Ṣukūk tap local liquidity and reduce FX risk.
• Multi-currency Ṣukūk enhance the global integration of Islamic finance.
Key Takeaway
Issuing Ṣukūk in various currencies enables Islamic capital markets to become more inclusive, diversified, and globally connected, while allowing issuers and investors to manage currency risk and access deeper pools of liquidity.
Overview
Ṣukūk can be issued in different currencies, depending on the issuer’s funding strategy and the target investor base. Issuing Ṣukūk in multiple currencies allows issuers to diversify funding sources, access new markets, and match financing needs with currency exposure.
US Dollar as the Traditional Currency
• The US Dollar (USD) has historically been the dominant currency for international Ṣukūk.
• Reasons include:
• High global liquidity,
• Wide international investor acceptance,
• Benchmark status in global capital markets.
Implication:
USD Ṣukūk are attractive to international investors seeking stable, widely traded instruments.
Expansion into Other Currencies
To broaden investor reach, issuers have increasingly issued Ṣukūk in non-USD currencies, especially in:
• Malaysian Ringgit (MYR), and
• Chinese Yuan (RMB).
This strategy helps:
• Attract regional investors,
• Reduce reliance on USD funding,
• Tap into deep domestic liquidity pools.
Examples of Yuan-Denominated Ṣukūk
• Khazanah Nasional Berhad
• Issued a 500 million yuan Ṣukūk in 2011,
• Marked one of the earliest RMB Ṣukūk issuances.
• Axiata Group Berhad
• Issued a two-year, 1 billion yuan Ṣukūk in September 2013,
• Demonstrated corporate appetite for non-USD Islamic financing.
Significance:
These issuances helped connect Islamic finance with China’s capital markets.
Ringgit-Denominated Ṣukūk by Gulf Issuers
Malaysia’s Islamic capital market is one of the most liquid globally, attracting foreign issuers—particularly from the Gulf region—to issue ringgit-denominated Ṣukūk.
Notable Examples
• Mumtalakat Holding Company
• Issued a 20-year RM 3 billion Murābaḥah Ṣukūk programme (October 2012).
• Abu Dhabi National Energy Company
• Issued a 20-year RM 3.5 billion Murābaḥah Ṣukūk programme (March 2012).
• Gulf Investment Corporation
• Issued a 20-year RM 3.5 billion Ṣukūk programme (March 2011).
Why Malaysia?
• Strong regulatory framework,
• Large institutional investor base,
• Well-developed Sharīʿah governance
Domestic Currency Ṣukūk Issuances
In addition to international issuances, Ṣukūk are frequently issued:
• By domestic issuers,
• In the local currency,
• Targeting resident investors.
Key Characteristics
• Governed by domestic regulations and tax rules,
• Used to:
• Tap local market liquidity,
• Support domestic financial market development,
• Reduce foreign exchange risk.
Example:
A government issues local-currency Ṣukūk to finance infrastructure using domestic savings.
Why Issuing Ṣukūk in Multiple Currencies Matters
• For issuers:
• Diversifies funding sources,
• Matches revenue and financing currencies,
• Lowers dependency on a single market.
• For investors:
• Provides currency diversification,
• Offers access to foreign Islamic investment opportunities.
Simple Exam-Friendly Summary
• USD has traditionally dominated international Ṣukūk issuances.
• Issuers increasingly use MYR and RMB to expand investor reach.
• Malaysian markets attract many foreign issuers.
• Domestic-currency Ṣukūk tap local liquidity and reduce FX risk.
• Multi-currency Ṣukūk enhance the global integration of Islamic finance.
Key Takeaway
Issuing Ṣukūk in various currencies enables Islamic capital markets to become more inclusive, diversified, and globally connected, while allowing issuers and investors to manage currency risk and access deeper pools of liquidity.
0 Comments