Commentary by RHB Global Sukuk Markets Research, Kuala Lumpur, Malaysia

Germany and Kuwait in Sukuk Pipeline

Germany (Aaa/AAA/AAA) is planning a $1 billion according to a USD Sukuk Pipeline report released by RHB Bank. Kuwait also plans to issue up to USD9.95bn via conventional bonds and Sukuk to cover its budget deficit.

Sukuk Pipeline

On ratings, Moody’s upgraded First Gulf Bank’s outlook to positive from stable following the announcement of a proposed merger with National Bank of Abu Dhabi (NBAD), which is expected to benefit from greater business diversification, stronger profitability and capital base and lower borrower and depositor concentrations. That said, FGB 1/17 traded tighter by 34bps at 1.31%.

Sukuk issuance is expected to pick up now that Ramadan has passed.

Sukuk Issuance

Bloomberg Malaysia Sukuk Index

Bloomberg Malaysia Sukuk Ex-MYR Total Return (BMSXMTR) and Dow Jones Sukuk Total Return (DJSUKTXR) were largely steady at 105.0 (+0.32%) and 162.4 (+0.29%) respectively as the Eid al-Fitr holiday began. Yields tightened 5.5bps across the board to 2.364%, with financial names leading the rally — FGB 1/17 (-34bps), Noor Bank B3T1 Pc6/21 (-22bps) and Boubyan Bank B3AT1 Pc5/21 (-22bps). Brent oil touched USD46.76bbl/bbl (-7.1% WoW) after the weekly US crude oil inventory report from EIA that fell smaller-than-expected (2.2m bbl).

Elsewhere, the number of oil rig counts in the US climbed for a second straight week by 10 to 351 as reported by Baker Hughes.