MANAMA: Sukuk issuance is set to fall 5 per cent this year to about $170 billion because of the coronavirus crisis, after four years of rapid growth, according to a Moody’s report published yesterday.
“The decline will be partly limited by the financing needs of GCC countries because of lower oil prices and the pandemic,” said Moody’s vice-president and senior credit officer Nitish Bhojnagarwala.
“We expect issuance will rally in the second half of the year to around $90bn, led by sovereigns in the Gulf.”
Despite the decline, this year will still see the second highest sukuk issuance total ever, following a 36pc increase last year.
Total issuance in the first six months of 2020 dropped to $77bn, down 12pc from the same period last year, as activity in Malaysia and Indonesia flagged.
Issuance in southeast Asia dropped by 25pc, while volumes rose by 7pc to $28.5bn in the six countries of the GCC.
Within the GCC, Saudi Arabia accounted for a little under half of total sukuk issuance, which at $12.7bn was broadly stable with the $12.8bn in the first-half of 2019.
The Saudi government accounted for around 54pc of the country’s issuance with corporate activity limited to one non-financial corporate.
Total Saudi government issuance since July 2018 stands at around $36bn.
Issuance increased in the UAE, Bahrain and Kuwait to a combined $15bn over the six months from $10.8bn in H1 2019.
The rise was supported by higher sovereign issuances in Bahrain.
In the UAE, increased sukuk issuance particularly by corporate and financial institutions, made the country the fifth largest issuer for H1 2020.
Volumes are likely to rebound in the second half of 2020, as governments raise money to finance their responses to the coronavirus crisis.
Persistently low oil prices could also increase deficits and financing needs among oil-exporting issuers, primarily in Gulf countries.
In the GCC, the decline in oil prices has put revenues under pressure and increased the gross financing requirements of the oil exporting countries relative to 2019.
Moody’s expects borrowing requirements of GCC sovereigns to be higher in 2020 than in 2019.
In addition, it sees GCC sovereigns continuing to diversify their funding mix in favour of sukuk instruments in order to develop their Islamic debt markets.
Several issuers will also need to refinance sukuk listed after 2015 that will begin to mature in the coming years.
Though the green sukuk market is in its infancy, issuance is likely to accelerate as efforts to combat climate change gain traction.
avinash@gdn.com.bh
© Copyright 2020 www.gdnonline.com
Copyright 2020 Al Hilal Publishing and Marketing Group Provided by SyndiGate Media Inc. (Syndigate.info).
