The sukuk was priced on 10 September 2014 at 2.005% (23 basis points over five-year US Treasuries, and saw strong demand from global investors, attracting orders exceeding US$4.7 billion and recording oversubscription of 4.7 times, allowing final pricing to tighten by 7 basis points from its initial price guidance.
Tsang added, “The success of this transaction demonstrates that issuance of sukuk using Hong Kong’s platform is a viable fund-raising option and widely accepted by investors around the world. I hope that the Sukuk issuance will catalyse the further growth of the sukuk market in Hong Kong by encouraging more issuers and investors to participate in our market.”
The Sukuk issuance comes after the legislative changes made in Hong Kong in July 2013, which provide a taxation framework for sukuk issuances comparable to that for issuances of conventional bonds.
The strong investor demand for the sukuk is a testament of investor confidence in Hong Kong’s credit strengths and strong economic fundamentals. The sukuk was assigned credit ratings of AAA by Standard and Poor’s and Aa1 by Moody’s.
The sukuk uses an ijarah structure, underpinned by selected units in two commercial properties in Hong Kong. The sukuk is issued by a special purpose vehicle, Hong Kong Sukuk 2014, established and wholly owned by the HKSAR Government. The sukuk is expected to be settled on 18 September 2014 and listed on the Hong Kong Stock Exchange, Bursa Malaysia (Exempt Regime) and NASDAQ Dubai.
Pricing at a spread of 23 basis points over the corresponding yield of US Treasuries represents the tightest spread ever achieved on a benchmark US-dollar issuance from an Asian (ex-Japan) government, setting an important new benchmark for Hong Kong and the rest of Asia.
The deal attracted interest from a diverse group of conventional and Islamic investors. The sukuk was allocated to over 120 global institutional investors, with 36% of the sukuk distributed to the Middle East, 47% to Asia, 6% to Europe and 11% to the US. By investor type, 11% was distributed to fund managers, 56% to banks and private banks, 30% to sovereign wealth funds, central banks and supranationals, and 3% to insurance companies.
“We are pleased to see such strong demand for the HKSAR government’s inaugural sukuk, as evidenced by the significant orderbook size and tight pricing. The Sukuk marks the first US-dollar sukuk originated by an AAA-rated government in the global Islamic financial market and signifies an important milestone in the development of the Islamic capital market in Hong Kong,” said John Tsang, the Financial Secretary of Hong Kong.
The deal attracted interest from a diverse group of conventional and Islamic investors. The sukuk was allocated to over 120 global institutional investors, with 36% of the sukuk distributed to the Middle East, 47% to Asia, 6% to Europe and 11% to the US. By investor type, 11% was distributed to fund managers, 56% to banks and private banks, 30% to sovereign wealth funds, central banks and supranationals, and 3% to insurance companies.
“We are pleased to see such strong demand for the HKSAR government’s inaugural sukuk, as evidenced by the significant orderbook size and tight pricing. The Sukuk marks the first US-dollar sukuk originated by an AAA-rated government in the global Islamic financial market and signifies an important milestone in the development of the Islamic capital market in Hong Kong,” said John Tsang, the Financial Secretary of Hong Kong.
Tsang added, “The success of this transaction demonstrates that issuance of sukuk using Hong Kong’s platform is a viable fund-raising option and widely accepted by investors around the world. I hope that the Sukuk issuance will catalyse the further growth of the sukuk market in Hong Kong by encouraging more issuers and investors to participate in our market.”
The Sukuk issuance comes after the legislative changes made in Hong Kong in July 2013, which provide a taxation framework for sukuk issuances comparable to that for issuances of conventional bonds.
The strong investor demand for the sukuk is a testament of investor confidence in Hong Kong’s credit strengths and strong economic fundamentals. The sukuk was assigned credit ratings of AAA by Standard and Poor’s and Aa1 by Moody’s.
The sukuk uses an ijarah structure, underpinned by selected units in two commercial properties in Hong Kong. The sukuk is issued by a special purpose vehicle, Hong Kong Sukuk 2014, established and wholly owned by the HKSAR Government. The sukuk is expected to be settled on 18 September 2014 and listed on the Hong Kong Stock Exchange, Bursa Malaysia (Exempt Regime) and NASDAQ Dubai.