Government Islamic lease securities trading starts

03/02/2015 05:54 AST

Government Islamic lease securities (Sukuk Al Ijara) issued by the Central Bank of Bahrain yesterday got listed on the Bahrain Bourse (BHB), it was announced yesterday.

It will now be traded openly under the symbol GILS.22.SUKUK.

Investors will be now able to buy and sell the sukuk by placing orders through the brokers who will feed them into the trading system.

The system will automatically match the orders in accordance to the price priority then time priority. The applicable commission of subscribing and trading of sukuk is set to 0.08 per cent of each transaction.

However, the commission will remain negotiable between the broker and the investor.

The BD200 million securities at a par value of BD1 each were issued on January 19 for a period of 10 years ending January 19, 2025.

Returns (rent) on the securities will be paid every six months throughout the tenure of this issue.

The annual rate of return will be 5.50pc.

Guidelines on trading of debt instruments were issued by the bourse on Sunday.

It says trading in the debt instruments secondary market will be open from 9:30am to 1:00pm from Sunday to Thursday.

The guidelines also clarify the types of orders, board lots and the tick size applied in the debt market.

The pricing mechanism in the debt market has also been set by the guidelines.

It states that the seller will receive the full amount of the transaction which includes the sukuk value plus the coupon which will be automatically calculated by the system.

All sukuk transactions will be settled within two business days of the completion of the deal.

Following this listing, the number of conventional bonds and sukuk issues listed on BHB is 10 with an approximate total value of $3.335 billion.

The sukuk were open for direct subscription by the public from January 11 to 14.

Islamic lease securities are instruments representing assets owned by the Bahrain government (land in Zallaq).

They were issued for the purpose of creating new opportunities for the investment of surplus financial resources in the economy and to provide a method of financing the expenditure and needs of various development projects.

In issuing these lease securities, the government sells an asset to investors who will buy and own it before renting back to the government at a predetermined rental rate, via a rental contract.

The government directly guarantees the Islamic lease securities via a binding promise to buy the asset at its original (par) value at maturity.

It also guarantees to continue renting the asset according to the rental contract until the end of the rental period.

Gulf Daily News