JEDDAH: The Capital Market Authority (CMA) announced yesterday that it would set up a market for debt securities including sukuks as part of its efforts to boost the Kingdom’s financial markets.
The stock market regulator said it would permit the formal issuance, trading, clearance and registration on the Tadawul exchange, which currently lists two debt issues traded over the counter.
It said Tadawul would be responsible for the details of setting up the market and when it would be ready for launch. No target date was given.
Industry officials cheered the measure, saying it would strengthen the Kingdom’s capital markets, especially in sukuk debt, which are instruments compliant with Shariah regulations.
“The potential for debt instruments including sukuk is high now that the cost of financing has risen due to the crisis,” said Ihsan Bu-Hulaiga, chairman of Watan Investment. “It is the beginning of a new era ... There are companies waiting for this, waiting to break away from banks,” he said.
Bu-Hulaiga said there is appetite from buyers who he expects would benefit more from sukuk bonds than the few other existing choices for savings. “Sukuk bonds will allow savers to earn more,” he said.
Tadawul has already developed the market, which will trade bonds and sukuk Islamic bonds through licensed intermediaries, CMA said.
In a previous statement, CMA chief Abdul Rahman Al-Tuwaijri disclosed the authority’s plan to launch a market for debt securities.
Mohammad Al-Jasser, governor of Saudi Arabian Monetary Agency, said in February that commercial banks and firms seeking financing should tap the debt market with the issue of bonds.
A surge in lending over the past five years that was fueled by record oil prices has brought several Saudi banks to limits on their credit capacity with loan-to-deposit ratio exceeding at the end of last year the limit imposed by the central bank. Bank loans in 2008 equaled their total during the previous two years, Jasser said in February.