Oct 03 2012

USD109bn sukuk issued in the first nine months of 2012

By Adnan Halawi USD109bn sukuk issued in the first nine months of 2012
03 October 2012

USD 40 billion worth of sukuk was issued globally in the third quarter of 2012, almost double the amount raised during the same period last year, according to Zawya's sukuk quarterly bulletin for 3Q 2012. This takes the total of sukuk issued during the first nine months of the year to a record USD 109 billion, up 69% from the same period last year.

The hefty issuance in the third quarter came despite the break caused by Ramadan and the summer holidays, according to the bulletin.

Source: Quarterly Sukuk Bulletin 3Q 2012

September itself was a remarkable and unconventional month. Turkey finally sold its first sovereign sukuk in the international markets, raising USD 1.5 billion, marking a long-awaited entry into the Islamic finance capital markets and setting the benchmark for more corporate sukuk out of the republic.

September witnessed issuance of USD 11.7 billion as opposed to USD 6 billion last year. Turkey announced that it might sell its lira sovereign sukuk as early as October. In September too, Sabana REIT sold a domestic SGD 80 billion sukuk which was listed on the Singapore stock exchange, signaling the island nation's comeback on the sukuk stage.

Cross-border sukuk continues, with many Asian and Gulf issuers targeting Malaysia and some Malaysian companies selling in China. After Development Bank of Kazakhstan sold its MYR sukuk in July, Saudi-based Al Bayan said it has plans to hit the Malaysian sukuk market while Bahrain's Mumtalakat is already selling sukuk in Malaysia. Even Ireland's Electricity Supply Board is considering selling sukuk in Malaysia.

Axiata Group sold a Chinese-renminbi-denominated sukuk of CNY 1 billion. The sukuk was accorded the "Emas" status by Bank Negara and it followed a similar CNY 500 million issuance by Malaysia's Khazanah Nasional.

Malaysia continues to dominate the market and stays upbeat in terms of regulatory initiatives to support the growth of the Islamic finance industry; the newest initiative being the introduction of the AgroSukuk - which would help garner capital to finance companies in the agriculture industry.

Thomson Reuters announced the launch of the Thomson Reuters Global Sukuk Index, an independent and transparent benchmark for investors seeking exposure to Shariah-compliant fixed-income investments, to be used to monitor the performance of the sukuk market.

Qatar's QIB, Turkey's Bank Asya, Saudi Arabia's Sadara and Saudi Hollandi, and the Indonesian government are but a few names expected to sell sukuk in 4Q 2012. Countries from North Africa are expected to join the club of issuers. This might have to wait till 2013 until the regulatory framework is in place.

Libya, Tunisia, Algeria and Morocco have all expressed their willingness to sell sukuk following similar announcements from Egypt. Oman's Islamic banking law could spur sukuk issuance out of the sultanate as well - the last of the six GCC states to get on the bandwagon.

With all this abundant issuance activity and the healthy pipeline, Zawya has revised its Global Sukuk Forecast for the remainder of the year. We expect the year to conclude with at least USD 134 billion and, in a best-case scenario, to surpass USD150 billion.

Adnan Halawi is product manager for Zawya Islamic Finance and can be contacted at ahalawi@zawya.com

© Zawya 2012

© Copyright Zawya. All Rights Reserved.

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