Sukuk issuance rose in 2019, Malaysia dominates supply

KUALA LUMPUR: Global sukuk issuance rose 6.0 per cent in 2019 as the range of issuers and investors broadened, although supply is still concentrated geographically, said Fitch Ratings.

The rating firm said longstanding structural impediments to growth remained, although, as more corporates tap the sukuk market, potentially including those with weaker credit profiles, legal precedents could eventually be set clarifying creditor treatment in a default.

“Sukuk issuance with a maturity of more than 18 months from the Gulf Cooperation Council (GCC) region, Malaysia, Indonesia, Turkey and Pakistan totalled US$42.2 billion in 2019, up from US$39.8 billion in 2018.

“The 2019 figure was nearly 40 per cent higher than ten years earlier, although below the record high reached in 2017,” it said in a statement yesterday.

Fitch said last year’s hike was driven by an uptick in the fourth quarter with decisions by major borrowers to tap the market were still a significant determinant of sukuk volumes.

In October, Saudi Arabia priced a US$2.5 billion ten-year issue as part of its systematic efforts to diversify its budget financing and help develop the regional shariah-compliant debt capital markets.

On sukuk supply, Fitch said it has diversified geographically over the last decade, having initially been dominated by issuers from Malaysia and Bahrain.

A more recent trend has been diversification by investor and issuer type.

“Robust demand from the traditional investor base of

Islamic banks who buy for investment and liquidity management purposes has been boosted by other regional and international investors, some of whom have dedicated sukuk funds or sub-funds.

“The inclusion of both conventional bonds and rated sukuk from five GCC countries in the JP Morgan EM Bond Index from 2019 has supported this process,” it added. — Bernama