With sukuk continuing to outperform conventional bonds in the Gulf region in Q2 2012, the Islamic bonds market is set to create new records in 2012.
"Today, countries all over the world are turning to Islamic capital markets for financing, and most major international financial institutions are active in Islamic banking," Abdulkareem A. Abu Alnasr, chief executive of Saudi Arabia's National Commercial Bank, was quoted as saying in an interview with 'Arab News'. Experts estimate that the sukuk market will grow 66% in 2012 to more than USD 44 billion compared to USD 26.5 billion in 2011.
Sukuk issuance in the first quarter of 2012 exceeded all expectations to reach a record USD 43 billion globally, almost double the average amount of sukuk issued in any given quarter in the past year, and almost half of the USD 85.5 billion issued during 2011. USD 25 billion was issued in the second quarter of 2012, making the first six months of the year the best half-year on record with USD 67.9 billion sukuk issued, according to the Zawya Sukuk Quarterly Bulletin.Source: Zawya Quarterly Sukuk Bulletin - Q2 2012
In the GCC, sukuk issuance in Q1 2012 exceeded conventional bonds for the first time. According to Adnan Halawi, content manager at Zawya, "In the first four months of 2012, Saudi Arabia alone sold a total of USD 6.5 billion of Islamic bonds via five issues. The General Authority for Civil Aviation's landmark SAR 15 billion (USD 4 billion) sukuk was sold in January and marked the beginning of a new age of Islamic bond sales in the kingdom."
Based on an analysis by Deloitte Middle East Islamic Finance Knowledge Center, Saudi Arabia's Islamic finance assets, valued at USD 94 billion, represent 26% of total GCC Islamic finance assets and 8.2% of global Islamic finance assets.
"Islamic banking is fast becoming part of the mainstream financial industry," Stephen Richards-Evans, regional head of private banking for Europe, Middle East, Africa and the Americas at Standard Chartered bank, told 'Mena FM' in June. An institution of the stature of Goldman Sachs announced it would issue USD 2 billion in sukuk, making it one of the first Western banks to do so.Source: Zawya Quarterly Sukuk Bulletin - Q2 2012
There is strong demand for obligations structured according to Islamic principles in a market which has now reached adequate maturity to accommodate obligors from a variety of backgrounds, varying by credit quality and geographic location.
Celine Salloum is a research analyst at Zawya.
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