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SPV issuer Hong Kong Sukuk
2014 Limited
Hong Kong Sukuk
2015 Limited imited
Amount USD1 billion USD1 billion USD1 billion
Profit rate 2.005% 1.894% 3.132%
Order book Oversubscribed 4.7
times with USD4.7
billion of orders
received.
Oversubscribed 2 times
with USD2 billion of
orders received.
Oversubscribed 1.72
times with USD1.72
billion of orders
received
Listing Hong Kong Stock
Exchange
Bursa Malaysia
Nasdaq Dubai/DFM
Hong Kong Stock
Exchange
Bursa Malaysia
Nasdaq Dubai/DFM
Hong Kong Stock
Exchange
Bursa Malaysia (Exempt
Regime)
Nasdaq Dubai
Arrangers
Advisors Allen & Overy
Norton Rose Fulbright
Linklaters n/a
Geographical
distribution of
investors
Middle East (36%), Asia
(47%), Europe (6%), US
(11%),
Middle East (42%), Asia
(43%), Europe (15%)
Middle East (25%), Asia
(57%), Europe (18%)
Sources: Sukuk prospectuses for 2014, 2015 and 2017 sovereign issuances,
Analysis of Sukuk Structures
As of 2017, Hong Kong had issued 3 sukuk with an issuance size of USD 1 billion each. The
structure of the first sukuk is based on the concept of ijarah, which requires underlying
tangible assets of at least 100% of the issuance amount. This had been a problem for Hong
Kong as the funding cost was too high. It had consequently changed the structure of the second
and third sukuk to wakalah, which uses less tangible assets, resulting in a lower funding cost,
with a third of the assets underpinned by selected units in an office building in Hong Kong; the
other two-thirds were underpinned by Shariah-compliant commodities. According to the
Financial Secretary, the government hoped that by adopting a more “asset light” structure in
the form of the wakalah structure, it could set a benchmark for potential issuers in the private
sector (South China Morning Post, 2015).
Analysis of Sukuk Issuances – Supply (Sell Side)
The inaugural sukuk, which was issued on 11 September 2014, had a 5-year tenure and
received USD4.7 billion of orders from 120 global institutional investors. Of these, 36% were
from the Middle East, 47% from Asia, 6% from Europe and 11% from the US. According to
investor type, 56% comprised banks and private banks, 30% wealth funds, central banks and
supranationals, 11% fund managers and 3% insurance companies. The sukuk was listed in
Hong Kong, Malaysia and Dubai. The profit rate came up to 2.005%, with an AAA rating by S&P.
An SPV had been established for this particular sukuk, i.e. Hong Kong Sukuk 2014 Limited. The
sukuk adopted an ijarah structure, underpinned by selected units in 2 commercial properties
in Hong Kong.