(MENAFN - Khaleej Times) There has been surge in worldwide Sukuk issuance that saw a two-fold jump to 98 issuances raising to $13.7 billion in the first half of this year, up against the $7.1 billion in the initial six months a year ago, say a report by Standard & Poor’s Ratings Services, which forecast about 150 more issues in the pipeline.
“On the heels of the sukuk market’s sharp upturn as of midyear 2010, we foresee sustained growth for the second half, given issuers’ interest in tapping the market, both in historical locations like Asia, especially Malaysia, and in other regions newer to sukuk,” said Standard & Poor’s credit analyst Mohamed Damak, in a report .
The rating agency examined current and future sukuk market growth trends in a new
report issued Wednesday, “Sukuk Issuance Is Up And Running, But Will The Climb Continue Apace?”
Sukuk issues numbered 98 during the first six months of this year versus 32 in first-half 2009, with an average issue of $140.8 million compared with $222.7 million one year earlier, the report say. Asia continued to dominate in the first half of 2010 with 70 per cent of total issuance. Malaysia cemented its position as the world’s top sukuk market, contributing 52.7 per cent of total issuance.
Some Gulf countries are slowly re-entering the market, taking their share of total issuance to about 30 per cent during the first half of 2010.
The market has also re-opened for well established issuers based in the United Arab Emirates.
S&P estimated that about 150 sukuk are either already in the pipeline or warming up on the sidelines.
“We expect that these will likely come to the market as and when conditions allow,” the report said.
Dollar-denominated sukuk accounted for a modest 12.4 per cent of total issuance in the first half of 2010, and in our view, dollar issuance over the next six months will likely remain limited.
Most sukuk have been issued in the form of over the counter (OTC) instruments that investment bankers developed to fit specific needs of issuers and then privately placed to meet specific needs of investors.
The market is now moving toward listed instruments, be it on international markets or on local markets such as Dubai, Malaysia, or Saudi Arabia. Listing sukuk on organized markets, we believe, is important for the liquidity of the instrument itself but also makes it easier to use for financial institutions seeking to broaden asset classes they use to manage their liquidity.
Slightly improved international market conditions are supplying some of the impetus. In first-half 2010, sovereigns accounted for the lion’s share of issuance, representing about 75 per cent of total volumes as governments strived to revive the market.
At the same time, some private sector issuers return to the market. Financial institutions and companies from both the Gulf Cooperation Council (GCC) countries and Asia gradually crept back to the market. “We think their return will likely continue,” the analysis said.
By Haseeb Haider [More]
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