CMA launches bond and securities market

The Capital Market Authority (CMA) yesterday launched the bond and securities market as leading stocks including banks, financial services, industries and petrochemicals reacted positively to the move by the regulator’s move.

The new market yesterday witnessed two major deals worth more than SR1.1 billion ($269 million) with the first deal involving sukuk (Islamic bond) of SABIC as 20,000 sukuks were sold for SR202 million at the rate of SR10,100 per sukuk.

The second deal involved sales of 80,000 sukuk for SR808 million at the same price. SABIC’s second issue of sukuk are valued at SR8 billion ($2.1 billion). It involves 800,000 sukuks with a face value of SR10,000 each and matures in 2027.

Abdullah Al-Suwailami, director general of Tadawul, said a number of intermediaries participated in yesterday’s market deals. “A number of other companies have also expressed the desire of their clients to participate in the market,” he said.

Al-Suwailami said the launch of the market went well without any problems. However, he said the market would take some time to attract more investors. “There is also shortage in the number of sukuk issues,” he pointed out.

Meanwhile, the Saudi Electricity Company (SEC), the Gulf’s largest utility by market value, yesterday began a roadshow for its second Islamic bond issue which bankers expect will raise up to SR7 billion ($1.87 billion).

Ali Al-Barrak, SEC’s chief executive, said in an interview last week that the state-controlled firm would raise about SR5 billion from the issue, SEC’s second after it raised SR7 billion in 2007 from its maiden issue. The 2007 sukuk was priced at 45 basis points above the Saudi Interbank Offered Rate (SIBOR).

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, who have access to the issue’s documents, said SEC has applied to the CMA to raise a minimum of SR3.5 billion.

“They will go for more. They can go for up to SR7 billion,” one banker said. The issue is expected to be priced above SEC’s first issue, mainly because of the turmoil that has affected credit markets globally.

“Things have improved greatly for them (SEC) ... A couple of months back, it was facing a three-digit pricing,” a second banker said. Saudi Electricity is currently carrying out projects worth SR75 billion to be completed within three years, Al-Barrak said last week. The new five-year sukuk are set to be priced at between 50 and 99 basis points, the two bankers said.