KUWAIT, Sept 18 (KUNA) -- KFH-Research stated in a study that was discussed
during the Global Islamic Finance Forum that is currently being held in
Malaysia about the developments of the global Sukuk market in the past few
years, that the global Sukuk market witnessed a significant boom during the
past six years.
Sukuk grew by 28.3% to reach a total value of Sukuk issuance worldwide
during the First Half of this year USD 210.8 billion. The year 2013 is
expected to witness further development.
The sukuk industry has emerged as one of the main components of the Islamic
financial system. Over the years, the sukuk market has grown by a compound
annual growth rate (CAGR) of 28.3% between 2006 and 1H12 to reach USD210.8
billion and contributed 13.4% of the global Islamic finance assets in 2011,
said KFH report.
Malaysia remains the largest issuer to date with more than USD 234.1
billion issued within the domicile until the end-1H12. Meanwhile, GCC sukuk
total USD92.4 billion in issuances to date. On the primary sukuk market,
Malaysia represented 71.6% of new sukuk issuances in 2011, followed by Qatar
(10.9%), the UAE (4.8%), and Saudi Arabia (3.2%). As at end-1H12, Malaysia's
market share was 68.2%, followed by Saudi Arabia (11.1%), the UAE (6.4%) and
Indonesia (5.9%), said the report.
The sectors driving sukuk issuances during the 1H12 include both government
and transportation, accounting for 54.7% and 22.1%, respectively, while there
have been a considerable number of issuances in the GCC and Malaysia from the
power and utilities sector.
Sovereign issuers maintain the bulk share of primary market issuances over
the past few years as governments increase their local currency programmes.
New jurisdictions have also played their part in the rising number of
sovereign papers, such as Saudi Arabia and Indonesia, by which the
international sukuk market grows to attract new investors.
Despite the growth in funds being raised through sukuk issuances, the
amount issued in US dollars remains stagnant compared to the growth in other
currencies. The underlying reason being that international sukuk are driven by
sovereigns who tend to concentrate on local liquidity levels while foreign
currency transactions require a greater deal of preparation and face exposure
to currency rate risks. During the 1H12, the Malaysian ringgit continued to be
the most significant currency, constituting 70.0% of all issuances.
Global outstanding sukuk reached USD210.8 billion as at end-1H12, up 18.3%
from the USD178.2 billion at end-2011. The total amount outstanding has
continuously advanced, even during the financial crisis, and in recent years
growth has accelerated due to the influx of new issuers and the growing
amounts issued by sovereigns and central banks. Between 2006 and 2011, the
secondary market has grown at a CAGR of 28.1%.
Sukuk yields during the 1H12 continued their steady decline by a further 50
basis points to 3.437%. The major leaders of this decline include the likes of
Dar Al-Arkan Sukuk (-532 bps), Emaar Properties Sukuk (-225 bps), Dubai DOF
Sukuk (-202 bps), DP World Sukuk (-146 bps), Al Hilal Sukuk (-126 bps) and
Kuveyt Turk 10/16 Sukuk (-122 bps).
In terms of sukuk total return performance, the HSBC/Nasdaq SKBI Total
Return Index, which tracks the return of an emerging sukuk portfolio
consisting of 33 USD/GBP/JPY/EUR-denominated fixed/floating rate vanilla
issuances, returned 5.12% during the 1H12. This is slightly lower than the
1H11 which returned 5.19% and lower than 1Q10's 5.64%.
Having already grown by 40.1% y-o-y at the end-1H12, the sukuk market looks
set to have another bright year ahead. The main drivers of growth continue to
stem from the sovereign and quasi-sovereign issuers who constitute 77.7% of
the primary market. The sukuk pipeline holds a number of potential sovereign
issuances from the likes of Indonesia, Malaysia, South Africa, Mauritania,
Pakistan, Sudan, the UAE, Nigeria and Turkey. (end)
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