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RIYADH: International sukuk issuance skilled a 9 % enhance within the first half of 2023, largely pushed by Saudi Arabia and a number of other rising issuers, in accordance with 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, decreased banking system liquidity and decrease oil costs meant a decline in sovereign native forex sukuk however greater 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.
Nevertheless, as native forex issuance drops, it’s going to nonetheless fall barely under international sukuk issuance recorded in 2022.
The geographic focus of sukuk exercise out there has garnered consideration, in accordance with the company’s credit score analyst Mohamed Damak.
Damak prompt that with a purpose to entice the curiosity of non-core jurisdictions, the business would possibly must reevaluate its issuance course of and try for higher harmonization of Shariah requirements.
Regardless of the market anticipating a rise in international forex exercise, the whole quantity of sukuk issued this yr is more likely to be decrease than the degrees recorded in 2022 or 2021.
S&P International anticipates higher use of the monetary instrument as issuers grow to be extra acutely aware of environmental, social, and governance points.
Damak said: “We additionally see continued development of sustainability-linked sukuk and count on this yr’s COP28 within the UAE will possible shed extra gentle on how Islamic finance and sukuk would possibly 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 optimistic, regardless of short-term uncertainties arising from ongoing macro volatilities.
“Islamic buyers’ 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 international 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 yr. This lower might be attributed to market volatilities and lackluster investor curiosity.
“Persistent macro volatilities and uncertainties, contraction in international 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, decreasing new financing wants for a lot of oil-exporting sovereigns.
Nevertheless, Malaysia, Bahrain, and a number of other core oil-importing nations nonetheless have funding wants and are anticipated to have price range deficits in 2023.
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