Saudi’s first primary dealer sukuk positive for Islamic capital market: Moody’s

Saudi Arabia’s first sukuk issuance under the primary dealers program, which totaled around SAR 3.5 billion, is positive for the development of the Kingdom’s Islamic debt capital markets, Moody’s rating agency said in a report.

The issuance broadens the investor base for government sukuk securities in the primary market and supports liquidity in the secondary market, it said.

“We expect the primary-dealers scheme will develop the local government sukuk market, and more generally, debt capital markets in Saudi Arabia, which is one objective in the government’s Financial Sector Development Program under Vision 2030, its national plan to reform the economy,” the report said.

In July, the Saudi debt management office appointed five local banks to act as primary dealers for local government securities, namely National Commercial Bank (NCB), Samba Financial Group, Saudi British Bank (SABB), Bank Aljazira and Alinma Bank.

Saudi Arabia has been the largest issuer of sukuk by value among GCC countries since 2017, raising around $9.5 billion of sukuk during the first seven months of 2018, and accounting for almost 55 percent of the region’s total sukuk issuance in that period.

“Going forward, we expect more issues and listings of government sukuk, which, along with the introduction of the primary-dealers scheme, will help develop the secondary market and build a benchmark yield curve for local corporate issuers,” it added.