PETALING JAYA: New global sukuk issuance is expected to be strong this year at around US$100bil (RM371bil) to US$120bil (RM445bil), according to RAM Rating Services Bhd.
The ratings agency said this was despite the challenging environment for Malaysia and the Gulf Cooperation Council (GCC) amid the plunge in global oil prices since last year.
With the geopolitical risks in the GCC, Europe’s quantitative easing programme and the US Federal Reserve’s rate increase, it said GCC sukuk issuers that tapped the international markets should wait until the second half of this year.
“This is so as potential investors can digest the full impact of soft oil prices and the possible effects on their credit standing,” it said in a statement yesterday.
Although the ringgit-denominated sukuk issuance was on a slow mode this year, it added that issues from the infrastructure industry and financial institutions, and some supply of Bank Negara Islamic securities were expected to maintain Malaysia’s global market leader position with 60% to 70% share.
“The sukuk market’s stability is also underpinned by sturdy demand from Islamic and conventional domestic institutional funds as well as Islamic banks that are less likely to be impacted by the external environment,” said RAM Ratings chief executive officer Promod Dass, adding that beyond leading the global sukuk market, innovation was also Malaysia’s forte.
Additionally, he said the Securities Commission’s sustainable and responsible investment (SRI) sukuk framework launched in August, last year gave Malaysia a chance to explore new frontiers.
“Khazanah Nasional Bhd’s plans for an upcoming SRI sukuk will be another milestone for Malaysia in this arena,” he added.
However, he noted that global issuers and investors still had to deal with matters involving syariah interpretation, documentation standardisation, tax treatment and on-going development of legal and regulatory frameworks to support the Islamic bond in different jurisdictions.
“These factors tend to segmentalise the global sukuk market and limit the pace of cross-border issuance,” said Promod.
He added that it would be tough to accelerate and design the global sukuk market’s growth.
He said when GCC sovereign wealth funds reallocate more of their portfolios to invest in sukuk from Asia, Europe, the United States and other non-Organisation of Islamic Cooperation countries, it could be the next leap for global sukuk to materialise.