In 2019, foreign currency issuance increased by around 20.8 per cent/Shutterstockby Kudakwashe Muzoriwa
S&P Global expects Sukuk market’s strong performance to continue in 2020 owing to robust global liquidity, a new fintech proposition as well as initiatives by governments and regulators. standardise Shari’ah interpretation
The rating agency expects total Sukuk issuance of around $170 billion in 2020 including $40 billion-$45 billion of foreign currency issuance, representing a five per cent growth compared to $162 billion which was issued last year.
In a report, S&P noted that high levels of liquidity in Indonesia, Turkey's efforts to tap all available financing sources, the return of some GCC sovereign issuers to the global market and good performance in Malaysia boosted Islamic bond issuance by 25.6 per cent in 2019.
Across the Arabian Gulf region, Saudi Arabia supported the Sukuk market with higher issuances of Saudi riyal denominated sovereign Sukuk under the Kingdom’s unlimited programme as well as a few private-sector issuers who tapped the market in 2019.
Additionally, the Central Bank of Kuwait continued to offer Sukuk as liquidity management instruments for Kuwaiti banks, however, issuance volumes increased slightly in Bahrain and dropped in the UAE.
According to S&P, the Bahrain Government had less need to tap capital markets after receiving the $10 billion GCC support package. The UAE saw a marginal drop in Islamic bond issuance due to corporates front-loading their issuance programmes in 2018 to prepare for less supportive market conditions.
Last year, foreign currency issuance increased by around 20.8 per cent which S&P credited to activity in Turkey as well as issuances by Malaysian and Saudi corporates and Qatari banks.
Overall last year, significant positive Sukuk market conditions and the unexpected performance of some sovereign issuers resulted in the stronger growth of the Sukuk market.
Without an abrupt turn of the economic cycle or a significant deterioration in the geopolitical environment, S&P expects issuers from core Islamic finance markets—the GCC, Malaysia, Indonesia, and Turkey) to maintain good access to the Sukuk market.
Furthermore, new fintech propositions in the Gulf are poised to open the market to small and midsize issuers.