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Discuss this article (0 Comments)Islamic bond issuance down 56%
by This email address is being protected from spam bots, you need Javascript enabled to view it on Wednesday, 14 January 2009
SUKUK VIEW: Standard and Poor's said Islamic bond issuance was down 56 percent in 2008.
Global Islamic bond (sukuk) issuance volumes declined dramatically in 2008, but the long-term prospects for sukuk remain good, Standard & Poor’s (S&P) said on Wednesday.
S&P cited the international financial crisis as the main factor in the fall in value of sukuk issued in 2008 to $14.9 billion, representing a 56 percent plunge from 2007.
“The decline in sukuk issuance in 2008 was as a result of global market turmoil, drying up of liquidity, widening of credit spreads, and investors' wait-and-see attitude," said S&P credit analyst Mohamed Damak.
Another factor that could have played a role in sukuk’s decline was the debate raised about the Shariah-compliance of some the bonds by the Accounting and Auditing Organization for Islamic Financial Institutions, he added.
Damak said he does not expect the market to start recovering before the second half of 2009 or early 2010.
Although volumes dropped, the sukuk market attracted roughly the same number of issuers, and S&P is confident that the longer-term outlook for Shariah-compliant bonds is positive.
The increasing popularity of Shariah-compliant products, government openness to Islamic finance, massive investment and financing needs in the Gulf, and issuers' desire to tap investors from the Middle East and Muslim Asia, suggest there is potential for sustainable growth in this market, according to the ratings agency.
“Issuers from more than 20 countries have expressed interest in issuing, or announced their intention to issue, sukuk, and we anticipate that several new sovereigns will enter the market,” S&P said in a statement.
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