The highlight of the New Year’s issues was the launch of the second trilateral Sukuk with the issuance of the month of March, as well as the second Sukuk for a maturity of 15 years during February, for the second time in two years, while the ninth of the seven new Sukuk was launched in four years, where the last new offering of this chip was in October 2018.
A monitoring conducted by the Economic Reports Unit revealed that the frequency of reopening old government bond issues increased by 25 percent at the end of 2019 compared to the same period in 2018, where 30 old issues were reopened during the 12 months of 2019 compared to 24 issues that were reopened for the same period in 2018 .
This modern methodology for issuance, and new to the region’s markets, was resorted to due to the circulation of government debt instruments above their nominal value on the local stock exchange, which paved the way for the National Center for Debt Management at the Ministry of Finance to reopen the previously issued issues from 2017 to now.
While the frequency of new releases decreased by 41.6 percent year on year, in 2019 up to seven new releases were released compared to 12 new releases from 2018.
These data mean a change in the traditional methodology followed with the issuance of government debt instruments in the local market since last year until now, with what was followed since 2015.
The mechanism for reopening old versions of the newly used methodologies in the global debt markets is one of the first Middle Eastern countries to adopt this method in the local market, thus bringing best practices to fixed income markets in the region.
It is clear when looking at the methodology of introducing fixed income tools to investors that it distributed this year between the “reopening” or “new releases” methodologies.
Monitoring “newspaper” showed the dominance of the “reopening” methodology over more than half of the issues this year, as the total value of the old sukuk that was re-opened by the end of 2019 amounted to 42.4 billion riyals, and this constitutes 60.8% of the total 2019 government issues, meaning that the sukuk The old ones listed in the local market received additional liquidity of 42.4 billion riyals, which made the value of these issues rise compared to the size of the version that they were previously.
While the total of new theses of sukuk amounted to 27.3 billion riyals for the same period, i.e. they constitute 39.2 per cent of the total Islamic bonds offered by the Kingdom’s government for the year 2019.
March monthly launch
Saudi Arabia last week closed the second largest domestic offering in terms of the total value of allocation of government debt instruments over the past four years, in an indicator that reflects the depth of the fixed income instruments market and the confidence of local investors in the creditworthiness of the Kingdom’s government that has the fifth highest credit rating from the investment grade from an agency Moody’s.
According to the data unit of the reports in the newspaper “Al-Iqtisadiya”, the July edition of 2017 came as the largest issue by value of about 17 billion riyals, followed by the March issue of savings bonds of about 15.5 billion riyals.
The Ministry of Finance had finished last Thursday receiving the requests of investors for its local issue for the month of March 2020 under the Saudi government sukuk program in riyals, as the size of the issue was determined with a total amount of 15,568 billion riyals.
The ministry clarified that the issues were divided into three segments, the first tranche of 170 million riyals, so that the final size of the chip will be 2.743 billion riyals for Sukuk due in 2025, which is reopening to a previous version.
As for the second tranche, it reaches 504 million riyals, so that the final size of the chip becomes 8.346 billion riyals for sukuk due in 2030, which is reopening to a previous issue, the last of which is the third tranche, with an amount of 14.894 billion riyals, so that the final size of the slide is 14.894 billion riyals for Sukuk due in 2050, which is the second trilogy Sukuk tranche.
The strength and durability of the economy
The Ministry’s announcement reflects the strength, durability, flexibility and flexibility of the Saudi economy and its ability to deal with shocks and confront global economic challenges, as well as the quality of financial policies pursued by the government, and the role that the Ministry of Finance plays in achieving the goals of the Kingdom’s 2030 vision and achieving economic and social development.
The Ministry has achieved a new achievement in the application of its plan to diversify domestic and international debt instruments through issuance of instruments compatible with Islamic law, aiming to secure the Kingdom’s needs for financing at the best possible costs in the short, medium and long term, where the risks are compatible with the financial policies in the Kingdom, and within the directions The structural, economic and financial reforms included in the 2020 transformation plan with the aim of implementing and achieving the Kingdom’s 2030 vision.
The closing of the proposal is considered a success in light of the oppression faced by the countries of the Corona Virus pandemic, in addition to warning the Organization for Economic Cooperation and Development of the great repercussions of the virus outbreak on global economic growth this year, and reducing its expectations for global GDP by half a percentage point to 2.4 In percent, the lowest level since the 2008-2009 financial crisis.
Although many countries of the world took, with the spread of “Coved 19”, precautionary measures to limit its rapid spread, as several countries pledged to support their economies in amounts exceeding more than a trillion dollars, including borrowing from fixed income markets, the Kingdom was proactive. In taking several early precautions to prevent the spread of the virus, in addition to supporting the efforts of countries and international organizations to confront this pandemic.
* Economic Reports Unit