$55-65b global Sukuk issuance in 2016 expected

London—RAM Ratings expects global Sukuk issuance to remain fairly resilient at around $55 billion–$65 billion in 2016 (2015: $66.4 billion), despite ebbing global market sentiment, particularly in Malaysia amid the weaker ringgit. Given the steep fall in crude oil prices that have adversely affected the core Sukuk markets of Malaysia and the Gulf Cooperation Council (GCC), our projection takes into account these countries’ government expenditure cuts and potential delays in infrastructure spending.
“While Malaysia and the GCC will remain the leaders in global Sukuk issuance, supported by the funding requirements of the corporate and quasi-government sectors, we envisage Indonesia in 2016 to still have the economic momentum to play a more significant role in tapping the global Sukuk market to fund its government budget,” observes Ruslena Ramli, Head of Islamic Finance at RAM. Historically, more than 90 per cent of global sukuk issuance has originated from Malaysia, the GCC and Indonesia. Another encouraging trend is the rising number of sovereign Sukuk issues in 2014 and 2015, which are anticipated to spill over into 2016 and increase the number of countries that are keen on expanding their domestic Sukuk markets. We have also analysed the Sukuk markets of the GCC member countries; the widening deficits of nations that are more dependent on oil exports could prompt the issuance of sovereign Sukuk.
Regulatory bodies, the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), the Islamic Financial Services Board (IFSB), the International Islamic Financial Market (IIFM), the Islamic Development Bank Group (IDB) and Malaysia International Islamic Financial Centre (MIFC) are collectively putting in efforts to build a stronger foundation for Islamic finance. RAM acknowledges their commitment to promote Islamic finance as part of the mainstream global financial system. As a result of these initiatives, issues involving Shari’ah interpretation, the standardisation of documentation and tax treatment are progressively being looked into – to strengthen the cost-effectiveness of issuing sukuk and to lay the foundation for the next stage of development for the global Sukuk market.—Agencies

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