Moody’s welcomes Saudi primary dealer sukuk scheme

The completion of the first sukuk issuance under Saudi Arabia’s new primary dealers programme has been welcomed by ratings agency Moody’s as a positive sign for Islamic capital market development.

The initiative is likely to broaden the investor base for government sukuk securities in the primary market and support liquidity in the secondary market, stated the Moody’s report.

In July, the Saudi debt management office appointed five local banks to act as primary dealers for sukuk issuance and to take on market making duties in the secondary market.

Saudi Arabia has been the largest sukuk issuer in the Gulf since 2017, raising $9.5 billion during the first seven months of 2018 and 55% of the region’s total sukuk issuance. The issuance has largely come from the state, which has accounted for more than 85% of the sukuk supply.

In Moody’s view, the primary dealers scheme will not only lead to more issues of government sukuk but will help build a benchmark yield curve for local corporate issuers.

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