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Fri 27 Sep 2019 09:55 AM

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Saudi Arabia seen driving $130bn sukuk issuance in 2019 - Moody's

Ratings agency says sukuk issuance is set to rise 6% to around $130bn this year, a fourth consecutive annual increase

Saudi Arabia seen driving $130bn sukuk issuance in 2019 - Moody's
Sukuk issuance is set to rise 6 percent to around $130 billion this year, a fourth consecutive annual increase.

Sukuk (Islamic bond) issuance is set to rise 6 percent to around $130 billion this year, a fourth consecutive annual increase, according to Moody's Investors Service.

In a new report, the ratings agency said Saudi Arabia and Malaysia are key drivers of the global market.

"Increased activity in Saudi Arabia and Malaysia helped drive strong issuance of $87 billion in the first six months and this has reduced funding needs," said Nitish Bhojnagarwala, VP-senior credit officer at Moody's.

"We therefore expect second-half volumes to moderate to around $43 billion, though Malaysia and Gulf Cooperation Council countries, particularly Saudi Arabia, will continue issuing regularly."

Moody's said governments across the core Islamic finance markets - Malaysia, Indonesia and GCC countries - continue to adjust their funding mix, supporting long-term growth in sukuk volumes.

The change reflects these countries' cultural affinity with Islamic finance, and their governments' desire to promote Shariah-compliant banking. Rising demand for sukuk from domestic Islamic banks, and central bank issuance in the core Islamic finance markets, are also supportive.

New entrants and green sukuk could also stimulate issuance, Moody's said, adding that it expects some African sovereigns to enter the market. Egypt set up a Shariah supervisory committee in April to oversee sukuk issuance.

"While the green sukuk market is in its infancy, issuance is likely to accelerate as efforts to combat climate change gain traction, building on initial green sukuk transactions in Malaysia and Indonesia," the agency added.

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