Sukuk issuance to hit USD275bn by 2013-end

22 April 2013
JEDDAH - The volume of sukuk (Islamic bonds) issued by end of the first quarter of 2013 reached $34.2 billion, increasing on a quarterly based rate at 21.5 percent, after an abundant year that witnessed a 54 percent increase in issuance, Kuwait Finance House (KFH)-Research said Sunday.

Sovereign issuances continue to dominate sukuk issuance, followed by issuances of corporates, then sub-sovereign authorities. The sukuk issuance is expected to reach $275 billion by the end of the year, it said.

During the first quarter of 2013, sovereigns accounted for 61.9 percent of total issuances, down from 66.1 percent over the previous quarter, while corporates took 23.2 percent of the primary market, also down from 25.3 percent during the fourth quarter of 2012. Quasi-sovereign or government-related entities, however, increased from 8.6 percent of the primary market during the period to 14.9 percent.

Sukuk from quasi-sovereign issuers grew by 110.9 percent quarter on quarter given the $2 billion issuance from the Saudi Electricity Company and $1 billion issuances by both Emirates Airlines and Dubai Electricity and Water Authority (DEWA).

Global outstanding sukuk reached $235.4 billion as of the end of the first quarter of 2013, up 2.6 percent from $229.3 billion at the end of 2012 and 16.7 percent year on year. The secondary sukuk market grew by 28.9 percent in 2012 on the back of a greater portion of longer tenured papers and a growing trend to introduce sukuk programs rather than one off issuances.

As of the end of the first quarter of 2013, there are $26.7 billion worth of sukuk papers which will be maturing for the rest of the year, expected to rise to $55 billion by yearend, and a further $32.4 billion maturing in 2014.

The HSBC/Nasdaq SKBI Yield Index shows that overall sukuk yields have risen by 4.1 percent or 11.5 basis points during the first quarter of 2013, reaching the highest level since October 2012. Sukuk yields, however, still remain at historically low levels, which will still entice issuers to tap the market before rising further. The major leaders of the rise include the Indonesia Sovereign (Nov-2018) sukuk (+18.3 percent), the Dubai DOF sukuk (+15.8 percent) and the Wakalah Global (Jul-2021) Sukuk (+13.4 percent).

Having grown at a CAGR of 57.0 percent over the past decade, the sukuk industry is expected to exceed the $275 billion-mark outstanding by the end of 2013.

© The Saudi Gazette 2013


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