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RIYADH: International sukuk issuance skilled a 9 % enhance within the first half of 2023, largely pushed by Saudi Arabia and several other rising issuers, based on credit score company S&P International.
In its report “The International Sukuk Market Is Displaying Pockets of Alternative,” the company attributed the surge to options unique to particular core Islamic finance markets, just like the Kingdom.
“In Saudi Arabia, for instance, diminished banking system liquidity and decrease oil costs meant a decline in sovereign native forex sukuk however larger international currency-denominated issuances,” famous the report.
International sukuk issuance will exceed its preliminary estimate of $150 billion and hit $160-$170 billion in 2023, added the company.
Nonetheless, as native forex issuance drops, it should nonetheless fall barely beneath world sukuk issuance recorded in 2022.
The geographic focus of sukuk exercise available in the market has garnered consideration, based on the company’s credit score analyst Mohamed Damak.
Damak prompt that with a purpose to appeal to the curiosity of non-core jurisdictions, the trade may have to reevaluate its issuance course of and try for better harmonization of Shariah requirements.
Regardless of the market anticipating a rise in international forex exercise, the full quantity of sukuk issued this 12 months is prone to be decrease than the degrees recorded in 2022 or 2021.
S&P International anticipates better use of the monetary instrument as issuers grow to be extra aware of environmental, social, and governance points.
Damak acknowledged: “We additionally see continued progress of sustainability-linked sukuk and count on this 12 months’s COP28 within the UAE will seemingly shed extra gentle on how Islamic finance and sukuk may assist deal with the challenges of local weather transition.”
In April, US-based Fitch Rankings reported that the worldwide sukuk outlook for the second quarter of 2023 remained constructive, regardless of short-term uncertainties arising from ongoing macro volatilities.
“Islamic traders’ liquidity and funding urge for food continues to be supportive of the longer-term sukuk story,” mentioned Bashar Al-Natoor, the worldwide head of Islamic finance at Fitch Rankings, in its world outlook report.
The sukuk issuance enterprise skilled an 18.5 % decline within the first quarter of 2023, amounting to $45.3 billion, in comparison with the identical interval within the earlier 12 months. This lower may be attributed to market volatilities and lackluster investor curiosity.
“Persistent macro volatilities and uncertainties, contraction in world liquidity and investor threat urge for food, and financial tightening is affecting sukuk and bond issuance in areas the place Islamic finance is lively,” added Al-Natoor.
This was primarily attributed to the surge in crude oil costs, lowering new financing wants for a lot of oil-exporting sovereigns.
Nonetheless, Malaysia, Bahrain, and several other core oil-importing international locations nonetheless have funding wants and are anticipated to have price range deficits in 2023.
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