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Tuesday, January 31, 2023

Launch Partners

Malaysia may see more sustainable Sukuk issuances before end of the year

Over the past month, there have been several developments in the Malaysian sustainable Sukuk space, from both the private and public spheres, with potentially more activities to come.

The government issued its inaugural ringgit-denominated sustainability Sukuk worth RM4.5 billion (US$970.69 million) on the 30th September 2022. Just one week prior, on the 22nd September 2022, the government redeemed the landmark RM666 million (US$143.26 million) Sukuk Prihatin, a digital Sukuk offering issued to fund the government’s COVID-19 recovery efforts.

The government first revealed its intention to issue up to RM10 billion (US$2.15 billion) in its 2022 budget, confirming that it would commence the offering in the fourth quarter of this year to fund eligible social or environmentally friendly projects.

Issued under the newly launched Sustainability Malaysian Government Investment Issues (MGII) announced in Budget 2022, the RM4.5 billion offering attracted RM10.7 billion (US$2.31 billion) in bids, the largest received for a long duration (at least 15 years) MGII/Malaysia Government Securities auction. It was priced at a profit rate of 4.66%.

It is likely the upcoming Budget 2023 will focus heavily on sustainability as indicated by the government, hence, sustainability Sukuk, ringgit-denominated or otherwise, may continue into 2023. With Sukuk Prihatin fully redeemed, it raises the question as to whether we will see the government issue more digital offerings in the future. The private sector has been keeping up pace in the space with Amanat Lebuhraya Rakyat issuing a RM5.5 billion (US$1.18 billion) sustainability Sukuk on the 23rd September 2022 with proceeds to fund its acquisition of four highway concession companies. Further, Ranhill Solar Ventures has proposed a Sukuk Murabahah program of up to RM310 million (US$66.68 million), which is expected to be issued this year, to fund the development of two solar plants.

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