Bloomberg News

Khazanah Said to Start Taking Orders for Yuan Islamic Bond

October 13, 2011

(Updates with comparative yields in second paragraph.)

Oct. 13 (Bloomberg) -- Khazanah Nasional Bhd., Malaysia’s state investment company, has started taking orders for the sale of the world’s first yuan-denominated Islamic bonds after an initial delay, according to two people familiar with the matter.

The three-year bonds, which pay returns from assets that comply with religious tenets, may price to yield about 3 percent, said one of the people, who asked not to be identified because the details are private. Average yields on yuan bonds sold in Hong Kong are 28 basis points lower than those on global Islamic notes, according to data from HSBC Holdings Plc.

Khazanah, which controls some of the Southeast Asian nation’s biggest companies including power producer Tenaga Nasional Bhd. and Malaysian Airline System Bhd., planned to sell 500 yuan of Islamic bonds last month, two people familiar with the matter said on Sept 14. Its deferment made sense given the volatility in global financial markets, central bank Governor Zeti Akhtar Aziz said on Sept. 26.

Khazanah spokesman Mohd Asuki Abas declined to comment on the sale when contacted by Bloomberg on his mobile today.

The Kuala-Lumpur based group joins Tesco Plc and Caterpillar Inc. in selling so-called dim sum bonds as the Chinese economy shows signs of resilience to the European debt crisis.

The yuan has strengthened 30 percent against the dollar since the start of 1999, the third-best performance of 25 emerging-market currencies tracked by Bloomberg.

The yield on China’s 3.26 percent government bonds maturing June 2014 held at 3.50 percent today. Average yields on Shariah- compliant debt dropped nine basis points, or 0.09 percentage point to 3.88 percent yesterday, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index.

Khazanah has the equivalent of $8.1 billion of bonds and loans maturing before 2024, with $1.9 billion falling due in 2013, Bloomberg data show.

--Editors: Barry Porter, Simon Harvey.

To contact the reporter on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry in Hong Kong at shendry@bloomberg.net.


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