Sukuk market peaks in 2012
16 May 2013 04:26 GMT
 

Malaysia has remained the dominant sukuk market followed by the UAE and other members of the six-nation Gulf Cooperation Council (GCC), National C (more)

Malaysia has remained the dominant sukuk market followed by the UAE and other members of the six-nation Gulf Cooperation Council (GCC), National Commercial Bank ( NCB ) said in a study sent to Emirates 24/7.

It said the direct negative impact of the 2008 crisis and the asset bubble burst in the GCC downsized the sukuk issuance to $20.6 billion in 2008.

"However, an exponential growth took place the following years which resulted in a spike in sukuk issuance worth $85.1 billion in 2011, surpassing pre-crisis levels."

The reports showed sukuk issuances peaked at $139.4 billion in 2012; a 63.8 pr cent growth over 2011. It said that despite obstacles such as disputes over different Shariah schools (GCC vs. Malaysia), underdeveloped secondary market, and limited supply, factors that are contributing to the growing popularity of sukuk as a debt instrument include a thriving Islamic funds industry; catered to by large pools of Muslim wealth and abundant liquidity, indicating that demand still exceeds supply.

"The Eurozone debt crisis is pushing investors and borrowers to other financial institutions less connected to the European melancholy. In addition, the drying up of syndicated loans market, and the collateral gap in peripheral Europe is eliciting a divergence from risky assets towards the safe havens of sukuk, which are asset

-backed/based," NCB said.

The report showed that in the first quarter of 2013, a total of 173 sukuk issuances worth 31.2 billion were actualized, a 29.1 per cent decline over the same period of 2012.

The number of countries issuing sukuk almost doubled from 9 to 19 between 2006 and 2012, and the trend is expected to continue as more countries join the league, it said.

It showed issuances by value remain dominated by Malaysia (63 per cent), followed by GCC (24 per cent). The UAE and Saudi Arabia account for 12.2 and 9.9 per cent of global sukuk issuances, respectively.

Since sovereign and sovereign-related sukuk are considered the safest bets for investors, 73 sovereign sukuk were issued worth $19.7 billion, arising from

funding and infrastructure investment needs represent the bulk of issuances this quarter. "This type of sukuk most likely will continue to shape and underpin the market."

© Emirates 24|7 2013

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