Global sukuk issuance falls 15% in H1 on geopolitical risks: S&P

Geopolitical risks and absence of jumbo local and foreign currency issuance by some of the GCC countries led to a 15.2 percent decline in global sukuk issuance in the first six months of 2018, S&P Global Ratings said in a report.

"The recent reinstatement of US sanctions on Iran and the continued animosity between Iran and some of its GCC neighbors are not helping investors' perceptions," it added.

The ratings agency expects slower sukuk issuance volumes in the last six months of 2018 on the back of  global tightening of liquidity conditions and lower financing needs of GCC countries as a result of higher oil prices.

Meanwhile, S&P said the inherent challenges related to the sukuk market continue to drag on expansion of the market though the overall volume of issuance will stand at $70 billion-$80 billion in 2018.

“That said, we think that Malaysia will continue to support market growth, owning to its strong market foundations and government support for Islamic finance,” the report noted.

Separately, the ratings agency termed standardization as an important topic, adding that "fixed-income investors tend to shy away from instruments with limited visibility on post-default resolution."

"Standardized Sharia requirements could prevent potential uncertainty on compliance after a transaction closes, and are therefore key in helping investors better understand the risks involved," it added.