Sukuk market performance is expected to continue strongly in 2020 helped by robust global liquidity, a new fintech proposition, and initiatives by governments and standard setters, said S&P Global Ratings in a new RatingsDirect report.
Total sukuk issuance of $160 billion-170 billion this year, including $40 billion-$45 billion of foreign currency issuance, according to the report titled “Sukuk Market To Continue Expanding In 2020, Barring Event Risk”.
This represents about 5% growth on the $162 billion seen in 2019. Abundant global liquidity and negative yields on more than $10 trillion of debt mean that issuers with a good credit story will find relatively easy entry to the sukuk market in 2020.
“Therefore, barring an abrupt turn of the economic cycle or a significant deterioration in the geopolitical environment, we think issuers from core Islamic finance markets (the GCC, Malaysia, Indonesia, and Turkey) will maintain good access to the sukuk market. We believe new fintech propositions in the Gulf are likely to open the market to small and midsize issuers.
“In addition, given the increasing commitment to the Principles of Responsible Investments, we think that the green sukuk market will continue to expand, aided by opportunities related to energy mix diversification in the GCC/Malaysia and investor diversification,” S&P Global Ratings said in the report.
We expect green sukuk to gain popularity as issuers look to diversify their investor base and GCC countries continue to diversify their energy mix.
Downside risks stem from the turning of the economic cycle or a materialization of geopolitical risk, which are not part of our base-case scenario.—Zawya/Reuters