x Abu Dhabi, UAESunday 21 January 2018

Tadawul opens bond trade for first time

Sukuk and other bonds were traded for the first time on the Saudi bourse Saturday with the listing of four existing issues.

Sukuk and other bonds were traded for the first time on the Saudi bourse yesterday with the listing of four existing issues worth 21 billion riyals (Dh20.56bn), according to agencies. The bonds market in the kingdom is expected to help diversify financing sources for rated firms in tight credit conditions. Three of the issues were by Saudi Basic Industries Corporation (SABIC), and are worth 16bn riyals. The other was issued by Saudi Electricity and is worth 5bn riyals, according to a newspaper report.

Saudi Arabia's bourse regulator, the Capital Market Authority (CMA), earlier this month approved the creation of a security market for trading sukuk and other bonds. The market is designed to provide a range of services including the listing and execution of trading in sukuk and bonds, clearing operations and the publication of price data, according to a statement on the website of Tadawul, the Saudi stock exchange.

"This is a good time to be launching this because yields are low," said Amlan Roy, the director of investment banking at Credit Suisse based in London. "Oil can only take [the economy] so far and the development of Saudi's capital market will be the key to its financial liberation." Coinciding with the launch of bonds trading, Saudi Electricity, the Gulf's largest utility by market value, yesterday launched a roadshow for its second Islamic bond issue, which bankers expect will raise up to 7bn riyals. Ali al-Barrak, Saudi Electricity's chief executive, told Reuters last week the state-controlled firm would raise about 5bn riyals from the issue.

Saudi Electricity raised 7bn riyals in 2007 from its maiden issue, having initially sought to raise only 2.5bn riyals. The 2007 sukuk was priced at 45 basis points above the Saudi interbank offered rate. Only institutional and individual investors resident in Saudi Arabia and with bank accounts in the kingdom were allowed to buy the five-year bonds. Bankers with access to the issue's documents said Saudi Electricity had applied to the CMA to raise a minimum of 3.5bn riyals.

The fluctuation of bonds and sukuk prices will not be restricted and the unit of change in a bond price is set at 0.001 per cent, according to agencies. * with agencies shamdan@thenational.ae