Global sukuk issuances stable, reach $31 bln in 9M: Fitch

Global sukuk issuance from major Islamic finance markets remained unchanged in the first nine months of 2019 year-on-year, Fitch Ratings said in a report.

Sukuk issuance with a maturity of more than 18 months from the Gulf Cooperation Council (GCC) region, Malaysia, Indonesia, Turkey and Pakistan totaled $30.6 billion in the first nine months of 2019 compared with $31.0 billion a year earlier.

“This supports our view that volumes normalized rather than declined last year after hitting record levels in 2017,” it noted.

Full-year volumes could still be highly influenced by the funding needs and strategies of large individual borrowers which may come to the market before year-end, as well as by geopolitical developments that could have a positive or negative effect on investor appetite.

That said, GCC issuers have continued to access the sukuk market to diversify their funding mix and develop the Islamic debt markets in the region.

Substantial international US dollar-denominated issuance in 2019 included deals from Turkey, Indonesia, Islamic Development Bank Trust Services Limited and First Abu Dhabi Bank, raising a total of $6.5 billion.  However, these figures do not capture the recent growth in domestic local-currency issuance, such as Saudi Arabia's riyal-denominated local issuance program.

Overall, Fitch said it expects new issuance volumes in the coming years will also be supported by refinancing activity, with nearly two-thirds of the $99.4 billion of outstanding Fitch-rated sukuk at end-H1 2019 mature in less than five years.

Meanwhile, GCC debt markets are still relatively developing, and individual sovereign funding decisions can profoundly affect total supply.

The Saudi Debt Management Office said earlier this year that it plans a new benchmark international Islamic bond issuance as part of its plans to diversify the financing of its national budget deficit, which could boost the 2019 total if executed before year-end.

Beyond the GCC, Malaysia remained the key source of sukuk supply in 2019, driven by Bank Negara Malaysia providing more short-term Islamic Treasury Bills to aid liquidity management at Islamic financial institutions, and also by a surge in local-currency corporate issuance, the report added.