Bank Negara Government Investment Issue More than Twice Over-Subscribed

The Malaysian Central Bank successfully auctioned MYR1.5 Billion of Murabahah based Investments achieving 175 orders totalling MYR 3.66 Billion. A profit rate of 4.786% was achieved for the 20 years tenor issuance which matures in 2035.

Sukuk or Not?

GII are a Sukuk structure based on a Murabahah contract being certificate of indebtedness arising from a deferred mark-up sale transaction of an asset, such as commodity, which complies with Shariah principles. Primary issuances are conducted through competitive auction via the Principal Dealer network while secondary trading remains under the Bay Al-Dayn concept.

Murabahah is a popular Islamic Finance contract but is seen as a structure which is relatively close to conventional bonds. The certificate represents debt to the holder and therefore is not tradable. Such Sukuk are popular in Malaysian market due to a more liberal interpretation of fiqh by Malaysian jurists permitting sale of debt (bai-al-dayn) at a negotiated price.

In July 2013 Malaysia abandoned a controversial sukuk structure known as bay al inah, which the central bank had used for its regular issuance. The structure resembled Murabahah, but Islamic scholars in the Gulf considered it to be a thinly disguised form of conventional debt and not shari’a compliant because the resale of goods or assets by the financier to the borrower is done at a fixed price.

MYR3B Issuance Expected Next Week

DanaInfra is expected to issue a MYR3 Billion Sukuk next week in order to fund a new transport system in Kuala Lumpur. MYR Deals and Sales volumes are down Year-on-Year in line with the down-turn in wider sukuk market across the world. DanaInfra is wholly by the Malaysian Ministry of Finance and as such demand is expected to be strong for the issuance.