"The smaller amount of issuance was due not only to the still-challenging market conditions and drying up of liquidity, but also to the less-supportive economic environment in the Gulf Cooperation Council countries, particularly in the United Arab Emirates," said Standard & Poor's credit analyst Mohamed Damak. "The medium-term outlook for the sukuk market remains positive, though, in our view, given the strong pipeline--with sukuk announced or being talked about in the market estimated at about $50 billion--and efforts to resolve the major difficulties impeding sukuk market development." 

Malaysia has taken the lead as the major country of issuance for sukuk, accounting for about 45% of sukuk issuances in the first seven months of 2009. Issuers in the Kingdom of Saudi Arabia have contributed another 22% of sukuk issued during the same period.

The default of a couple of sukuk was possibly partly responsible for the slowdown in issuance. The silver lining was that these defaults should provide the market with useful information on how sukuk will behave following default. 

Major hurdles remain on the path to sukuk market development, however, including:

• Difficult market conditions, which are slowing the planned issuance of numerous sukuk;The lack of standardization, notably when it comes to Sharia interpretation; and

• The low liquidity of the sukuk market, which constrains investors trying to exit the market in times of turbulence or access the market looking for distressed sellers.

The report is available to RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor's public Web site at www.standardandpoors.com; select Ratings in the left navigation bar, then Find a Rating. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4011.

- Ends -

About Standard & Poor's in the Gulf Cooperation Council
Standard & Poor's is the leading provider of financial market intelligence to customers in the Gulf's credit risk management, wealth management, and data and information markets. Since entering the region in the early 1990's, Standard & Poor's has become the largest provider of credit ratings in the G.C.C, rating 114 issuers. In equity markets, Shariah-compliant versions of Standard & Poor's global and regional equity market indices - S&P 500, S&P Europe 350, S&P Japan 500 and S&P/IFCI GCC - have created new opportunities for Islamic investors to benchmark their international investments and for asset managers to create new investment products serving the Islamic community. Standard & Poor's Fund Services launched a qualitative fund management rating service for regional asset managers in 2007. For further details on Standard & Poor's regional capabilities please visit www.gcc.standardandpoors.com

For more information, please contact
Mohamed Damak, Paris 
Emmanuel Volland, Paris 
Ritesh Maheshwari, Singapore

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© Press Release 2009