New rules for bonds, sukuk to help raise capital in UAE, says Al Turifi

The new rules on bonds and sukuk are aimed at maximising the advantages the UAE have in the financial sector and create new products to raise capital.

By Haseeb Haider - Principal Correspondent, Abu Dhabi

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Published: Tue 16 Sep 2014, 11:12 PM

Last updated: Tue 7 Apr 2015, 10:47 PM

“We already have a clear advantage with many incentives already in place including a strong regulatory structure, said Abdulla Al Turifi, the chief executive officer of Securities and Commodities Authority, in a speech read out at an awareness seminar on bonds and sukuk in the capital.

Al Turifi said SCA’s regulations on bonds and sukuk aims to follow best international practices and cutting age market standards with the goal of modernising the country’s financial markets. These regulations are part of a move to increase UAE as a hub for finance services and promote the local debt markets as an important component of financial markets, the chief executive officer said. The growth of the international and local bond market brings to investors more option for diversification of their investments and offers them benefits of wide spectrum of attractive returns bonds, he said.

The total size of bond and sukuk issuances in the UAE alone in the first half of the year exceeded Dh44.2 billion, constituting almost 55 per cent of total issuances in the Middle East region during this period. The first half of 2014, the total sukuk issuance in the GCC grew by 19 per cent compared with a six per cent in Malaysia according to Standard & Poor’s, the report predicted that corporate and infrastructure sukuk issuance is likely to rise over the next few years as companies’ refinancing needs grow and as entities establish themselves as sukuk issuers. The chief executive said that the emirate of Sharjah last week launched its ten-year debut sukuk at a size of $750 million. The size of the Emerging Market corporate debt pool was estimated at over $1 trillion in 2013.

The aggregate primary issuance of bonds and sukuks in the GCC during the first half of 2014 totaled $56.71 billion, an increase of 24.71 per cent year-on-year. Currently there are three corporate bond issues listed on DFM and eight corporate bond issues on Nasdaq Dubai.

Prominent law firms have commended the new rules, saying SCA had defined a key development element in new bonds and sukuk regulations as main theme which includes: A clear distinction between private placements and public offers with exemptions for private placements from the requirements of seeking approval.

Minimum issue size requirement reduced to Dh10 million down from Dh50million, which would encourage smaller companies also, he said.

The SCA has introduced “Debt Securities Issuance Programme” to allow for fast track process for seasoned issuers.

Developing the process of reporting requirement, cross boarding listing and over-the-counter trading and clearing and settlement outside local markets e.g. through Euroclear or Clearstream, according to international market practices.


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