GLOBAL SUKUK ISSUANCE ALMOST FLAT
Funding needs, geopolitical developments to determine investor appetite, says Fitch
INTERNATIONAL sukuk issuance in major Islamic finance markets is almost unchanged in the first nine months of this year compared with the same period last year, says Fitch Ratings.
Still, the rating agency expects full-year volumes to be highly influenced by the funding needs and strategies of large individual borrowers as well as by geopolitical developments that could have a positive or negative effect on investor appetite.
Fitch said sukuk issuance with a maturity of more than 18 months from the Gulf Cooperation Council (GCC), Malaysia, Indonesia, Turkey and Pakistan totalled US$30.6 billion (RM127.9 billion) in the first nine months, compared with US$31 billion a year ago.
“This supports our view that volumes normalised rather than declined last year after hitting record levels in 2017. Sukuk issuance in the nine months of this year was close to the US$29.3 billion average for the same period in 2012-2016,” it said.
GCC issuers continued to access the sukuk market to diversify their funding mix and develop the Islamic debt markets in the region.
Substantial international US dollar-denominated issuance this year included deals from Turkey, Indonesia, Islamic Development Bank Trust Services Ltd and First Abu Dhabi Bank, raising a total of US$6.5 billion.
The figures did not capture the recent growth in domestic localcurrency issuance, such as Saudi Arabia’s riyal-denominated local issuance programme.
Fitch said GCC debt markets were relatively developing, and individual sovereign funding decisions could profoundly affect total supply.
Beyond the GCC, Malaysia remained the key source of sukuk supply this year.
Fitch said the increased volumes were driven by Bank Negara Malaysia providing more short-term Islamic Treasury Bills to aid liquidity management at Islamic financial institutions, and also by a surge in local-currency corporate issuance.
Notable corporate deals included energy service firm Serba Dinamik Holdings Bhd’s US$300 million sukuk, rated “BB-” by Fitch — the first US dollar highyield sukuk offering in the AsiaPacific region.
“The Malaysian market shows how, as the syariah-compliant investor base grows, the cost of sukuk issuance can become more competitive relative to conventional bonds, although this is not yet the case elsewhere,” said the rating agency.