Jan 16 2013
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Outstanding global sukuk reaches $240bn on back of $140bn sold in 2012
Overview of the global outstanding sukuk market
Breakdown of sukuk issued in 2012
12 remarkable developments in 2012
Regulatory workshop continues
$140 billion worth of sukuk were issued in 2012 globally, according to Zawya's 4Q12 Sukuk Quarterly Bulletin, a 64% increase from 2011's $85 billion. Last year marked the best year on sukuk record, taking the global outstanding sukuk market to an unprecedented height of $240 billion as of end 2012.
An assessment of 2012 shows that Malaysia dominated issuance with $104 billion or 74%, followed by Saudi Arabia with $10.5 billion or 7.5%. UAE and Indonesia followed with just above $6 billion each, while Qatar is in fifth place with $5.4 billion. Interestingly, new entrants Turkey features in the top issuers list, lying sixth with $2.4 billion.
Sovereign and quasi sovereign issuers continued to dominate the sukuk landscape in 2012 with 83.7% while the rest were sold by corporate issuers.
In terms of issuers by sectors, governmental institutions continued to lead with 66%. Interestingly, the Transport sector was the second largest issuer of sukuk with 11.3%, replacing the traditionally second largest sector, financial services, that was pushed down to third with 10.8%. The benchmark issues by Saudi Arabia's General Authority for Civil Aviation (GACA) ($4 billion) and Malaysia's PLUS ($10 billion) - the largest ever sukuk to date - catapulted the Transport ssector to second place.
The year witnessed the auction of 26 international sukuk with a total size of $18.5 billion, significantly outdoing last year's international issuance of $8.2 billion from 14 issues. The remaining $121.5 billion or 86.8% were sold domestically.
London Stock Exchange hosted the largest number of international deals that were listed throughout the year with 12 deals of $10.7 billion while the Irish Stock Exchange - a rising Islamic finance centre -came second by hosting 6 deals worth $4.4 billion.
Sukuk were issued in 13 different currencies with Malaysian Ringgit being the top currency, followed by USD and Saudi Riyal - thanks to abundant Saudi issues. In addition, the year witnessed new entries such as the Turkish Lira, Euro and Chinese Yuan.
Source: Zawya Sukuk Monitor
12 remarkable developments in 2012
1- Saudi Arabia became the second largest issuer of sukuk globally. The GACA's SAR15 billion ($4 billion) issue marked the start of a new era in the Kingdom and triggered 14 other issues throughout the year, covering diverse sectors, market of issuance, currencies and listings. The year saw innovative structures from issuers Tasnee, Ajil and Almaraai. Orix Leasing closed the year with a SAR240 million issue, and 2013 opened with Savola Group Sukuk. Saudi Arabia's increasing participation in the sukuk market is set to continue, with an anticipated second issuance by GACA. The kingdom is now Kingdom of Sukuk.
2- Turkey became a sukuk player with its first global sovereign sukuk ($1.5 billion) in the international markets, and thereafter its first domestic Turkish Lira denominated sukuk.
3- The FWU $55 million privately placed sukuk marked the first to utilize a computer software programme and intellectual property rights under an Ijara structure, the first ever sukuk issuance by a German corporate and the largest ever sukuk from a European Corporate. A similar attempt was reported from France when Bibars issued a sukuk, in EUR, for the first time. European attempts are still tentative, with small companies seemingly impatient for their sovereigns to start issuing national papers to set the benchmark.
4- ADIB's Tier 1 Sukuk was the first public perpetual hybrid Tier 1 capital issuance by a Middle East issuer. It was oversubscribed 30 times. Innovation continues.
5- North Africa seems to be the region with sukuk frameworks "in progress". Egypt, Libya, Tunisia and Morocco, even Mauritania, took serious steps towards regulating and allowing sukuk issuance. While nothing materialized in 2012, drafts, regulations and debates took place, all of which could translate into issuances in 2013. More tangible movements were seen in Oman, with the release of the country's Islamic Banking Regulatory Framework (IBRF) and a draft of sukuk regulations. The country is expected to be the 6th and last GCC country to join the sukuk club.
6- Issuers impatient for sukuk in their home jurisdictions looked to other markets. Kazakhstan finally made it to the market with Development Bank of Kazakhstan (DBK) selling its sukuk in Malaysia.
7- Also in South East Asia, Sabana REIT sold a sukuk, marking a comeback for Singaporean issuers.
8- Cross-border issuance continued to be a trend to watch with DBK, NBAD, TAQA, and Kuwait's GIC selling their sukuk in Malaysia, and Axiata selling its CNY-denominated Sukuk.
9- The industry witnessed the default of Dana Gas' sukuk in 2012. While the default was a shock, it did not impact the industry as badly as it probably would have years ago.
10- Transport sector received a boost from PLUS, GACA and infrastructure projects. Project finance continues to be a key driver for sukuk growth globally.
11- TAQA, a good example of a traditional conventional bond issuer, tested the sukuk market for the first time in 2012.
12- 2012 broke all records with the following cumulative statistics derived from Zawya's Sukuk Monitor: USD240 billion outstanding sukuk globally, sukuk issued from issuers from 23 countries around the globe since inception, 15 stock exchanges hosted sukuk, and 20 currencies utilized to sell sukuk to date.
2012 Sukuk Regulatory Roundup
Another important development is the establishment of new sukuk regulations and the enhancing of existing ones from seasoned jurisdictions. The former category includes Oman, Egypt, Tunisia, Mauritania and Australia while the latter category includes Malaysia, Qatar, Dubai's DFM and Pakistan. 2013 and beyond will doubtlessly see more issuances with such developments in the pipeline.
In Egypt, EFSA finished a draft proposal of a law regulating sukuk that will most probably lead to the birth of the first sukuk from the largest Arab Muslim nation in 2013. Dubai Financial Market published an exposure draft for acquiring and trading sukuk and it is expected to be finalized in March 2013.
Central Bank of Pakistan issued an investor's guide for GOP Ijara Sukuk and the Securities Exchange Commision of Pakistan (SECP) issued a notification: Issue of Sukuk Regulations, 2012. In Hong Kong, a consultation paper to facilitate development of sukuk was released, while in Japan the Taxation of J-Sukuk Q&A was published.
Central Bank of Mauritania completed a study that looks at the potential development of a local Shariah compliant securities market.
Among other initiatives worldwide, Thomson Reuters launched a Global Islamic Index to monitor the sukuk market.
With all that happened in 2012, the year could be viewed as the culmination of years of work and effort. However, given the huge momentum that is expected to follow from 2013 onwards, 2012 could also be viewed as the springboard year for accelerated growth of the niche sukuk industry, with outstanding market expected to reach $300 billion by end of 2013.
For a detailed outlook on the sukuk market, I invite you all to read the Thomson Reuters Zawya Sukuk Perceptions and Forecast Study 2013 that was launched during the World Islamic Banking Conference in Bahrain in December 2012. The study can be downloaded here.
Adnan Halawi is Product Manager for Zawya Islamic Finance and can be reached at firstname.lastname@example.org
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