By SIOW LI SEN IN SINGAPORE and PAULINE NG IN KUALA LUMPUR
MALAYSIA's Khazanah Nasional yesterday made its debut in Singapore's debt market with a splash to the tune of $1.5 billion.
Khazanah's $1.5 billion inaugural issue of sukuk, or Islamic bonds, is three times the size of Singapore's sukuk market until now.
According to Thomson Reuters, until Khazanah's debut yesterday, total sukuks in Singapore dollars weigh in at $489 million, with the biggest issue being last year's $200 million offering from the Islamic Development Bank.
Khazanah, which is Malaysia's sovereign wealth fund, sold the bonds in two tranches comprising a five-year $600 million portion and a 10-year $900 million portion.
Demand for the sukuk was strong with subscription totalling $4.3 billion from 78 accounts, said Clifford Lee, DBS managing director and head of fixed income, global financial markets.
The bond issue comes a week after Khazanah beat India's Fortis Healthcare in a takeover battle for Singapore's Parkway Holdings in a deal that could cost Khazanah $3.5 billion.
Some in the market view the huge sukuk as Khazanah's way of raising funds for its Parkway deal, given that the issue was done by an accelerated book-building process on Aug 3.
The bonds represent not only Khazanah's inaugural Singapore dollar issue for the local debt market, but also the biggest sukuk issue ever seen here, Mr Lee said. The sale was done in slightly less than three hours, he said.
'It was just great for the market; we've been trying to kickstart the Islamic debt market,' said Mr Lee.
Monetary Authority of Singapore deputy managing director Ong Chong Tee said that the sukuk would add to the growing range of Syariah-compliant financing in Singapore. 'We welcome regional participants to tap into its growing capital markets and to continue to add to the depth and diversity of markets in the region.'
Khazanah's five-year $600 million tranche, which attracted an order book of $2.4 billion, was priced at 2.615 per cent.
Banks accounted for the bulk of the five-year sukuk at 67 per cent, followed by fund managers (18 per cent), sovereign funds (6 per cent) and private banks (5 per cent).
Investors based in Singapore accounted for 64 per cent, Malaysia (17 per cent), Brunei (9 per cent), Hong Kong (8 per cent) and Europe (2 per cent).
The 10-year tranche of $900 million, which attracted $1.9 billion in orders, was priced at 3.725 per cent.
For this longer tenure, banks took 38 per cent, followed by insurers (27 per cent), fund managers (20 per cent), private banks (10 per cent) and sovereign funds (5 per cent).
Again, investors based in Singapore accounted for the majority at 68 per cent, followed by Hong Kong (18 per cent), Malaysia (11 per cent) and Europe (2 per cent).
DBS's Mr Lee said that Khazanah's deal shows that the Singapore market is ready for good issuers.
'People love the credit and feel the price is fair,' he said.
The number of asset fund managers and private banks which participated in the issue also showed the vibrancy of the market as these investors are more trading oriented, he said.