Global sukuk issuance to reach $30b

DUBAI — The global sukuk issuance is expected to reach $30 billion in 2010 in light of the recovery in global economic activity and increasing popularity of Shariah-compliant products, according to Kuwait Finance House 
(KFH) report.

By Abdul Basit

Published: Tue 24 Aug 2010, 11:41 PM

Last updated: Mon 6 Apr 2015, 4:45 PM

Total global Islamic bond issuance reached $20.2 billion last year, up from $14.1 billion in 2008, and reached a record $31 billion in 2007. The sukuk issued globally jumped by 116.3 million to $16.5 billion during the first half of 2010, compared to $7.6 billion raised during the same period last year. In the Middle East and North Africa region sukuk issuance increased by 235 per cent in the second quarter, compared to the same period in 2009. Issuance of Islamic debt from the Gulf has declined 24 per cent to $2.5 billion so far this year, involving sales by three companies, according to data compiled by Bloomberg. The UAE may sell Islamic securities as legislators consider establishing a local debt market, central bank governor Sultan bin Nasser Al Suwaidi said in March.

KFH report said long-term prospects for the sukuk market are expected to remain strong given the increasing popularity of Sharia-compliant products, governments’ support for Islamic finance, huge investment and financing requirement in the GCC and Asia regions, and issuers’ desire to tap investors from the Middle East and Muslim Asia.

With a healthy array of Sukuk in the pipeline, the market is attracting interest from an increasing number of issuers in Muslim and non-Muslim countries alike.

On a quarterly basis, the first quarter sukuk issuance was up by 114 per cent year-on-year to $4.7 billion, while the second quarter issuance increased by 112 per cent yoy to $11.8 billion, underpinned by an emerging markets-led global economic recovery and huge government stimulus packages and infrastructure spending. The research report expects Sukuk market to maintain its vitality during 2010, and foreseeable future under the push of positive factors monitored by the report.

The most important factors are stimulus programmes, huge government expenditures and government initiatives that will enforce and develop Sukuk as well as the increasing popularity of Sharia-compliant products, the report said. According to the report, the value of the Sukuk market has increased to reach about $100billion in 2009, pointing out that the total value of issues for this market has seen a marked increase during the first half of 2010.

Hence, sovereign and similar funds played a prominent role in the rehabilitation of the sukuk market after hitting 79.7 per cent of the funding period, as Malaysia is still controlling the largest share of global sukuk market.

At the level of the GCC, the report highlighted government allocation of these countries to spend large amounts on development projects during 2010 and the coming years, which enforce the demand for Islamic sukuk.

Over the years, the sukuk market has grown to reach approximately $100 billion and contributed to 12 per cent of the total global Islamic finance assets in 2009.

The sukuk market has come out of the worst of the financial crisis and its prospects remain high. In 2009, global sukuk issuances rebounded by 58.8 per cent yoy to $24.65 billion compared to the $15.46 billion raised in 2008.

Malaysia continued to dominate the global Sukuk market, contributed to 60.5 per cent of total value of sukuk issued in the first half. Saudi Arabia and Indonesia each trailed at 14.1 per cent. As such, by currency type, ringgit-denominated sukuk deals topped at 53.4 per cent, followed by US dollars deals of 10.3 per cent and Qatar riyal issues of 8.3 per cent. —

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