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Thu 22 Feb 2018 10:18 AM

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Video: Why Sukuk issuance will decline in 2018

There was a spate of global Islamic bond, or sukuk, issuances in 2017, led by those from the Gulf Cooperation Council (GCC) countries. Saudi Arabia, for example, issued a $9bn sukuk, the largest ever issued globally.

There was even activity from non-core Islamic finance countries, such as Hong Kong and, for the first time, Nigeria, which added to the record volume.

Other non-core Islamic finance countries are expected to continue to tap the market with Morocco and Tunisia both expressing intentions to issue sukuk in 2018, while the United Kingdom announced its intention to go to the market again in 2019 upon the maturity of its 2014 sukuk.

The exceptional performance of these bonds was driven by good liquidity conditions both in the GCC and abroad, alongside certain countries’ desire to develop their Islamic finance industries.

Some issuers, particularly those in Saudi Arabia, were able to choose sukuk over conventional bonds because they were less pressed for time to raise funds.

However, the outlook for sukuk in 2018 is more uncertain.

While there are significant financing needs for core Islamic finance countries such as the Gulf countries and Malaysia, tighter global liquidity conditions, mounting geopolitical risks, and slow progress on the standardisation of Islamic finance products will continue to hold the market back from its full potential.

That’s why, total sukuk issuance is likely to decline to between $70bn and $80bn in 2018, despite the fact that the financing needs of some Islamic finance core countries will remain high.

Jeremy Lawrence and Eddie Taylor discuss.

(Source: Arabianbusiness.com YouTube channel)