First Islamic Bond Index introduced in Bahrain
The Bahrain Monetary Agency (BMA) on Tuesday hosted officials from Dow Jones Indexes and Citigroup Corporate and Investment Banking, both leading global index providers, who unveiled the pioneering Dow Jones Citigroup Sukuk Index.
The index, which has a provisional launch date of April 2, was created primarily for use as the benchmark for investors seeking exposure to Shari’ah-compliant fixed-income investments. In addition, the index may serve to increase secondary market trading in this growing asset class and facilitate cross-market relative value trading among different asset classes.
The Dow Jones Citigroup Sukuk Index will include investment-grade, U.S. dollar-denominated Islamic bonds—also known as Sukuk—issued in the global market. At launch, the Index will initially track seven issues: Islamic Development Bank,
Solidarity Trust Services Ltd, BMA International Sukuk, Qatar Global Sukuk, Malaysia Global Sukuk, Sarawak Sukuk and Dubai Global Sukuk.
To be included in the Index, an Islamic bond must comply with both Shari’ah law and the Bahrain-based Auditing & Accounting Organization of Islamic Financial Institutions (AAOIFI) standards for tradable Sukuk. Once a bond meets these criteria, Dow Jones Indexes and Citigroup will apply market-based criteria such as minimum maturity of one year, minimum issue size of US$250 million, and an explicit or implicit rating of at least BBB-/Baa3 by leading rating agencies.
Dr. Abdulrahman Saif, Executive Director of Banking Operations at BMA, said: “We are happy to host the launch of the Dow Jones Citigroup Sukuk Index in Bahrain. The BMA has historically led the development of the Islamic Banking industry and continues to pioneer the enhancement of its regulatory environment. The new Index will, no doubt, encourage issuers and investors alike to tap into this burgeoning industry.”
Mohammed Al-Shroogi, Citigroup Managing Director-Middle East, and Chairman of Citi Islamic Investment Bank, said: “With the guidance of regulatory bodies, such as the BMA, Citigroup’s global index and Sukuk capabilities have been developing over the years to suit the growing needs of the Islamic Banking industry. The proposed launch of the Index, in partnership with Dow Jones Indexes, is in line with our global strategy to offer Islamic issuers and investors world-class and innovative products that contribute to expanding the frontiers of Islamic capital markets.”
Rushdi Siddiqui, Global Director, Dow Jones Islamic Indexes, said: "We are delighted to have Bahrain as one of the main roadshow locations for announcing the new index. When launched on April 2nd, the Dow Jones Citigroup Sukuk Index will encourage more issuers in the OIC and OECD countries and will open up fresh opportunities for secondary market trading and conventional debt refinancing."
Dow Jones Indexes launched the first Islamic indexes—the Dow Jones Islamic Market Index family—in 1999. Today, the Dow Jones Islamic Market Indexes are used by asset managers in 16 countries for a variety of financial products that screen out activities that are incompatible with Islamic investment guidelines. Excluded from the indexes are stocks of companies in these lines of business: alcohol, tobacco, pork-related products, financial services, defense/weapons, and entertainment. Also excluded are companies that fail any of three financial ratios.
Citigroup has been a leader in the Islamic Finance business for more than 20 years and successfully has arranged Islamic transactions for issuers in Europe, Asia, LATAM, Africa and the Middle East. Citigroup’s Islamics operation began in 1981 in London, and in 1996 Citigroup was the first international institution to set up a separately capitalized Islamic Bank, Citi Islamic Investment Bank (CIIB). CIIB’s core business has been the origination, structuring and distribution of Islamic banking transactions in structured trade finance, leasing, project financing, advisory services and Islamic securities.
Members of the Dow Jones Shari’ah Supervisory Board are: Sheikh Nizam Yaquby, Bahrain; Sheikh Dr. Mohd Daud Baker, Malaysia; Sheikh Justice Muhammad Taqi Usmani, Pakistan; Sheikh Dr. Mohamed A. Elgari, Saudi Arabia; Sheikh Abdul Sattar Abu Ghuddah, Syria; and Sheikh Yusuf Talal DeLorenzo, U.S.
End of day index values of the Dow Jones Citigroup Sukuk Index will be available on www.djindexes.com,