The Hong Kong Special Administrative Region became the first Asian sovereign this year to sell US dollar-denominated debt that adheres to Islamic law after it raised $1 billion via a 10-year sukuk on Tuesday.
It is the Hong Kong government's third foray into the emerging Islamic bond market and extends the issuer’s yield curve to 10 years from five years. Hong Kong SAR issued an inaugural $1 billion five-year note in 2014 and another $1 billion five-year note in 2015.
The Reg S sale was oversubscribed, with an order book running to $1.7 billion and spread over 88 accounts, according to bankers running the deal, as investors lapped up the opportunity to put some money to work in safe-haven assets.
“Hong Kong’s commitment to the development of Islamic finance reinforces its position as a leading international financial centre and a bridge between Greater China and the Islamic world,” Gina Tang, head of debt capitals market for Great China at HSBC, said. “The third international sukuk from the Hong Kong SAR government builds out its yield curve and allows it to access a new group of investors at a longer tenor.”
In terms of distribution, 57% of the deal was sold to Asian investors, with the Middle East and Europe taking 25% and 18%, respectively. By investor type, banks took 53%, fund managers 25%, and sovereign wealth funds, central banks and supranationals 11%.
Joint global coordinators HSBC and Standard Chartered went out with an initial price guidance of 70 to 80 basis points over the 10-year US Treasury yield early on Tuesday, before narrowing the spread to 2bp each side of 70bp. Final pricing of the February 2027 deal was fixed on par to yield 3.132, or 68bp over the US Treasury yield, according to a term sheet seen by FinanceAsia.
Hong Kong's sukuk priced inside Mass Transit Railway’s November 2026 bond curve, which traded on a G-spread of 70bp, according to one syndicate banker said. “There was very big appetite and the pricing was aggressive,” the banker said.
Hong Kong-listed MTR is majority owned by the Hong Kong government, which holds more than 75% of the city’s underground operator.
According to Dealogic, six issuers have sold $4.25 billion-worth of US dollar-denominated Islamic bonds so far this year, including the Kingdom of Bahrain’s $600 million Islamic bond, which sold on Tuesday and is due to mature in October 2028.
Joint bookrunners for Hong Kong’s new sukuk were CIMB and National Bank of Abu Dhabi PJSC. The co-Managers were Bank of Communications Hong Kong branch, Emirates NBD PJSC, KFH Capital Investment Company K.S.C.C., and Malayan Banking Berhad.