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USD 63 bn sukuk issued in first 9 months of 2011

By Adnan Halawi, Team Leader – Fixed Income, Zawya
03 October 2011
GLOBAL SUKUK REVIEW: SEPTEMBER 2011

A construction boom and refinancing needs fueled growth in the GCC sukuk market, while issuers from all over the world are expected to make a strong comeback or a first appearance.

At least USD 5.7 billion worth of sukuk were issued in September 2011, a 9% increase from the same period last year. Except for the small regular issues by the central banks of Bahrain and Gambia, Malaysia was the sole issuer of all of the sukuk in September. The Malaysian government, through its central bank, alone sold USD 5.45 billion. Malaysia would have achieved a further milestone if its Khazanah issued the dim sum sukuk that it was planning to issue in September.

However, this does not necessarily reflect the full picture of the global sukuk landscape during the first nine months of the year or the remainder of the year. Figures compiled by Zawya Sukuk Monitor reveal that USD 63 billion of sukuk were issued during the first nine months of 2011, up 90% from the USD 33 billion issued during the same period last year. This makes 2011 the best year on record even before it ends.

Although Malaysia accounted for a hefty 69% of the total with USD 43.5 billion, 11 other countries contributed. The six GCC states issued a combined USD 16.1 billion or 25% of the total. New entrants this year include Yemen, Iran and Jordan. GCC sukuk issuance was hindered partly by the unrest in the many parts of the MENA region.

Sukuk Breakdown by Country During First 9 Months of 2011 (USD m)

Source: Zawya Sukuk Monitor

Strong Comebacks Anticipated

As the last quarter of 2011 begins, the sukuk market is expecting a number of issues to materialize. Saudi-based SATORP will kick start the quarter with an expected benchmark USD 1 billion sukuk, labeled as the first project finance sukuk to come from the kingdom.

Bahrain is expected to sell a USD 1 billion sukuk in the international markets, signaling a strong return to the sukuk landscape for the unrest-hit kingdom. Helping this effort is likely to be a corporate issuance from the Al Baraka Banking Group , the first corporate sukuk from Bahrain this year.

Qatar, which is the biggest GCC issuer so far this year through its domestic QAR 33 billion sukuk, could see a series of corporate sukuk issues including QIIB , Masraf Al Rayan and QIB. QIIB recently hired Qatar National Bank , Standard Chartered Bank and HSBC to advise on this sukuk.

The UAE, which already made its comeback this year through Emaar , HSBC , FGB , SIB and Nakheel , continues with firm steps. Dubai-based Islamic mortgage company Tamweel revealed it is considering issuing a multi-million dollar sukuk by the end of the year. This comes on the heels of a similar announcement by Al Hilal Bank in September.

Indonesia, which has done well this year with USD 2.3 billion and by introducing and selling short-term Islamic treasury bills, will make a strong comeback to the international market with a USD 1 billion sukuk. The government named Citigroup, Standard Chartered and HSBC as arrangers and the deal is expected to close in October. Turkey might surprise the market with a series of issues as well before year-end.

Sukuk Pipeline

Source: Zawya Sukuk Monitor

Construction, Refinancing Fuel Pipeline

Apart from the debt-restructuring requirements for many companies which could fuel the growth of sukuk over the coming years, showcased by Nakheel 's and First Investment Company's sukuk, project finance could be the main engine for growth of that market in many countries, especially in the GCC.

Research indicates that stunning figures will be spent on construction in the coming years. Examples include Qatar, with an expected spend of USD 80 billion to USD 100 billion over the next five years to prepare and deliver the infrastructure required to support the huge influx of visitors forecast to attend the 2022 FIFA World Cup. The construction sectors in Saudi Arabia and Kuwait are estimated to spend USD 420 billion and USD 63 billion, respectively, over the next three years.

Earlier Stories:
The Rise of Wakala
Global Sukuk: Shorter And Wider

Adnan Halawi
Team Leader - Fixed Income
ahalawi@zawya.com

© Zawya 2011