(MENAFN- The Peninsula) By Satish Kanady I The Peninsula
The sukuk market enjoyed a strong start to the year but it may not last, S & P Global Ratings said yesterday in a report. 'High levels of liquidity in Indonesia, Turkey's efforts to tap all available financing sources, and the return of Qatari and Saudi Arabian issuers to the market have boosted issuance of sukuk 17.6 percent in the first five months of 2019, said S & P Global Ratings Head of Islamic Finance, Mohamed Damak (pictured).
S & P now anticipates total sukuk issuance of $115bn this year, including $32bn of foreign currency issuances, which is the upper limit of our previous forecast 'However, this represents little-to-no growth on the $114.8bn seen in 2018, with selective investors, worsening geopolitical stability in the Middle East, and challenges inherent to sukuk likely to hold back the market, added Damak.
In January, S & P Global noted that tightening liquidity conditions worldwide, high geopolitical risks in the Middle East, and challenges inherent to sukuk issuance will likely dampen sukuk market performance in 2019. As per the report, S & P Global Ratings anticipates total issuance of $105bn-$115bn ($28bn-$32bn for foreign currency issuances and $85bn-$95bn excluding reopening of instruments) this year. Nevertheless, it expects higher demand for funding in most GCC countries, given our reduced oil price assumptions compared with last year's outturn of $71 for Brent.
'If the oil price falls, and stays below $55 for a sustained period, we would expect to see higher sukuk issuance by Gulf Cooperation Council (GCC) sovereigns. - In our view, accelerating standardization and creating local currency sukuk markets in the GCC could help the industry enhance its value proposition and stimulate growth, the report noted.
It also expects Malaysia will continue to support market growth.
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