Sukuk market performance in 2019 will likely be dampened by tightening liquidity conditions worldwide, high geopolitical risks in the Middle East, and challenges inherent to sukuk issuance, said S&P Global Ratings in a new report.
The ratings agency expects higher demand for funding in most GCC countries, given its reduced oil price assumptions of $55 in 2019 and beyond compared with last year’s outturn of $71 for Brent, it said in the report titled “Oil Prices Will Help Shape Sukuk Markets’ Performance In 2019,” published on RatingsDirect.
It also expects Malaysia will continue to support market growth.
“We anticipate total sukuk issuance of $105 billion-$115 billion ($28 billion-$32 billion for foreign currency issuances and $85 billion-$95 billion excluding reopening of instruments) this year,” said S&P Global Ratings head of Islamic Finance Mohamed Damak.
This compared with around $91.4 billion in 2018 ($114.8 billion including reopening, which consists of issuances under local currency unlimited programs). If the oil price falls, and stays below $55 for a sustained period, we would expect to see higher sukuk issuance by GCC sovereigns.
“In our view, accelerating standardization and creating local currency sukuk markets in the GCC could help the industry enhance its value proposition and stimulate growth,” added Damak.
Source Zawya