Brunei develops its Islamic capital market
With a little help from HSBC Brunei bypasses conventional capital markets in developing an Islamic capital market instrument.
Brunei has become the first sovereign in the world to bypass conventional capital markets in developing an Islamic capital market instrument. It appointed HSBC and HSBC Amanah as consultants.
The programme, denominated in Brunei dollars, involves the issue of short-term ôSukuk al-Ijaraö which are effectively asset-backed lease securities that are compliant with Islamic law, or Shariah. It is also the first Ijara-based Islamic money market programme ever implemented anywhere in the world.
Launched on April 6, but only just announced to the media, the transaction was a fully-allocated offering of Bru$150 million. Pricing was Singapore Interbank Offered Rate (SIBOR)-3.75 basis points, with a yield of 3.4% for a three-month paper. Distribution went to domestic institutional investors and foreign commercial banks operating in Brunei.
"The government wanted to limit the distribution of the Sukuk to onshore-based banks for the maiden issue," explains Joel Consing, HSBC's managing director and head of financing solutions group, Asia Pacific.
The launch follows last year's announcement by Sultan Haji Hassanal Bolkiah Muizzaddin Waddaulah of the development of a capital market in Brunei based on Islamic principles of Shariah.
HSBC Amanah, the Dubai-based Islamic finance division of the HSBC Group, has been involved in some of the worldÆs most prominent Sukuk transactions, including, in 2002, the first-ever sovereign Sukuk transaction, MalaysiaÆs $600 million Sukuk Al-Ijara. Since then, HSBC Amanah has been lead manager of Sukuk transactions for Qatar, Dubai, Pakistan and a number of corporate issuers.
"This programme will not only help develop a local capital market but also encourage other entities in Brunei to issue Sukuks themselves," says Asad Zafar, the Dubai-based managing director of the asset finance advisory group, HSBC Amanah. "This will in due course provide opportunity to the public to invest in domestic projects based on Shariah principles, rather than send their money abroad."
The programme, denominated in Brunei dollars, involves the issue of short-term ôSukuk al-Ijaraö which are effectively asset-backed lease securities that are compliant with Islamic law, or Shariah. It is also the first Ijara-based Islamic money market programme ever implemented anywhere in the world.
Launched on April 6, but only just announced to the media, the transaction was a fully-allocated offering of Bru$150 million. Pricing was Singapore Interbank Offered Rate (SIBOR)-3.75 basis points, with a yield of 3.4% for a three-month paper. Distribution went to domestic institutional investors and foreign commercial banks operating in Brunei.
"The government wanted to limit the distribution of the Sukuk to onshore-based banks for the maiden issue," explains Joel Consing, HSBC's managing director and head of financing solutions group, Asia Pacific.
The launch follows last year's announcement by Sultan Haji Hassanal Bolkiah Muizzaddin Waddaulah of the development of a capital market in Brunei based on Islamic principles of Shariah.
HSBC Amanah, the Dubai-based Islamic finance division of the HSBC Group, has been involved in some of the worldÆs most prominent Sukuk transactions, including, in 2002, the first-ever sovereign Sukuk transaction, MalaysiaÆs $600 million Sukuk Al-Ijara. Since then, HSBC Amanah has been lead manager of Sukuk transactions for Qatar, Dubai, Pakistan and a number of corporate issuers.
"This programme will not only help develop a local capital market but also encourage other entities in Brunei to issue Sukuks themselves," says Asad Zafar, the Dubai-based managing director of the asset finance advisory group, HSBC Amanah. "This will in due course provide opportunity to the public to invest in domestic projects based on Shariah principles, rather than send their money abroad."
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