First Islamic Bond Index to set global industry standards

The joint opening address at IIFF was delivered by Nasser Al Shaali, COO, Dubai International Financial Exchange (DIFX) and Aref A. Kooheji, Executive VP, Investment & Corporate Banking, Dubai Islamic Bank. They urged fellow industry professionals to develop talent for the future, promote innovation, consolidate, set universal industry standards and "Keep your sights firmly focused on growth," commented Al Shaali.

That was the perfect introduction for the long-term strategy of the Dow Jones Citigroup Sukuk Index which is to unlock the global potential for Islamic bonds or the performance of global bonds complying with Islamic investment guidelines.

The index, which has a provisional launch date of April 2, was created primarily for use as the benchmark for investors seeking exposure to Shariah-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.

Rushdi Siddiqui, Global Director, Dow Jones Islamic Indexes, said:

"For the past eight years, Dow Jones Indexes has been pioneering Islamic indexes in an effort to streamline investment opportunities for Global investors with Shari'ah-compliant preference. Moreover, the Dow Jones Citigroup Sukuk Index, when launched on April 2nd, will encourage more issuers in the OIC and OECD countries and will open up fresh opportunities for secondary market trading and conventional debt refinancing."

Mohsin Nathani, chief executive officer, Citi Islamic Bank, said: "The launch of the Index will be 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. However, Islamic products must compete with conventional products, if they are to penetrate non-Islamic markets. They can't exist only because of faith, innovation and indexing will spur growth."

"Another area for growth will clearly be the move away from Sovereign to Corporate Sukuks, as an avenue for raising capital or as a way of refinancing conventional debt. CFOs will focus on the quality of performance to justify a business decision," he added.

"The Dow Jones Citigroup Sukuk Index follows the same consistent, quantitative methodology as the Dow Jones Islamic Market Indexes, which are monitored to ensure their continued compliance with Shariah Law." added Forum Director, Christianna Tsiterou. "We are honoured that delegates attending IIFF were the first to witness their ground-breaking strategy for the global expansion of Sukuks."

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.