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Global Sukuk Issuance to Drop

Global Sukuk Issuance to DropGlobal Sukuk Issuance to Drop

Global sukuk issuance may drop by as much as 28% in 2018 on the back of tighter liquidity, mounting geopolitical risks, and slow progress on standardization, according to ratings agency Standard & Poor’s.

Sukuk issues rose 45% year-on-year to $97.9 billion in 2017, the highest level since 2014, boosted by Saudi Arabia’s $9 billion inaugural sukuk in April and other (Persian) Gulf Cooperation Council states (UAE, Bahrain, Oman, Qatar and Kuwait) sovereign issuances, S&P said on Monday in its Global Sukuk Market Outlook, news outlets reported.

But tighter global liquidity stemming from US interest rate rises and slower asset purchases by the European Central Bank, coupled with geopolitical risk considerations in the Middle East, will push issuances down to between $70-90 billion this year.

“Overall, we think that the cost of funding for issuers will rise and that liquidity from developed markets channeled to the sukuk market will reduce or become more expensive,” the agency said.

The ongoing diplomatic standoff between Qatar and its neighbors, may also dampen the appetite of US and European investors for (P)GCC-issued sukuk, it said.

Meanwhile, slow progress on the standardization of Islamic finance products may also act as a brake on the overall sukuk market in the coming year, S&P predicted, as highlighted by the recent standoff between Dana Gas and its creditors.

The Abu Dhabi-listed energy firm declared $700 million worth of sukuk non-Shariah compliant in June, citing recent developments in Islamic finance, and claimed it was not obliged to repay its debt to creditors including New York-based BlackRock.

 

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