Sukuk Issuance to Slow after Record start to 2016

In a recent interview, respected Islamic finance practitioner Daud Baker who serves on the Shariah Advisory Council at the Malaysian Central Bank, Bank Negara stated the current volume of US dollar sukuk is unlikely to be maintained, though could change in about two months’ time as potential issuers absorb global economic developments.

In a recent report, Fitch Rating stated the proportion of sukuk issuance’s hit a record in Q1 2016 in the main markets. Citing the increase in compliant legal frameworks to allow such issuances, Fitch stated new sukuk issuances in GCC, Malaysia, Indonesia, Turkey, Pakistan and Singapore was around USD$11.1 billion, a 21% year on year increase. Sukuk represented 39.3% of total bond and sukuk issuances in these countries during Q1 2016.

Sukuk Entrants Should have Issued Two Years Ago

In response to rumoured debut sovereign sukuk issuances by a number of African nations, Mexico and Kazakhstan as well as a return to the market by Hong Kong (for its third sovereign issuance), Daud Baker stated the time is not currently right for new entrants and wished such entrants would have entered the market two years previously.

Despite this he added that the demand of quality Sovereign issuers as compared to the private sector remains strong with many banks and institutions on the outlook for such Sovereign issuers due to their low risk.

He added that Hong Kong was a different case as it has previously issued sukuk and has a track record and therefore would be able to tap the current market.