Fitch: Total new sukuk issuance up 13% year on year

KUALA LUMPUR: Total new sukuk from Gulf Cooperation Council+7 (GCC+7) issuers rose 13% year-on-year in the first quarter of 2015 in line with stability in crude oil prices, Fitch Ratings said.

In a statement on Wednesday, it said sukuk accounted for 26% of total new issuance, marginally down from 31% in the fourth quarter of 2014.

It noted two notable large sukuk issues in the first quarter of 2015 were by IDB Trust Services Ltd and RAK Capital at US$1bil each. 

In the first quarter of 2015, the total sukuk issuance volume rated by Fitch grew 3.5% to US$45.1bil (RM160.1bil), with sovereigns and corporates taking near equal shares of sukuk issuance at 37% and 36% respectively, followed by financial institutions at 26%. 

It added total sukuk and bond issuance in the first quarter of 2015 increased 47% from the fourth quarter of 2014 when volumes were exceptionally weak due to falling oil prices and rising geopolitical tension. 

“Loans (Islamic and conventional syndicated loans) in the GCC and Malaysia were down 25% in the first quarter of 2015. 

“However, the quarter to quarter share of Islamic finance deals was up by 198% and accounted for 20% of total new loans, which came mainly from GCC’s two largest economies - Saudi Arabia and the UAE,” said Fitch.

It expects Islamic finance to continue growing rapidly, saying issuance for new sovereigns may be seen from Jordan, Tunisia and even Egypt this year. 

Moreover, Fitch said, liquidity will become more important due to declining oil reserves and also because GCC governments are keen to continue to spend and expand. 

“This could translate to more sukuk issuance, rather than the usual easy bank financing. Islamic banks are also trying to strengthen their balance sheets in preparation for Basel III, which means tapping the sukuk market,” it said. - Bernama

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