S&P: Corporate and infrastructure Sukuk issuance likely to advance, despite recent decline
Corporate and infrastructure Sukuk issuance is likely to rise over the next few years, despite the fall in issues over the past eight months compared to the same period of 2013, says Standard & Poor's Ratings Services in its new report Why Corporate And Infrastructure Sukuk Issuance Is Declining, Despite Healthy Prospects.
Total Sukuk issuance (including financial institutions and sovereigns) grew by 19 per cent in the GCC and by six per cent in Malaysia over the same period. By contrast, issuance has trended downward this year in the Gulf Cooperation Council (GCC) and Malaysia, dropping 33 per cent and seven per cent, respectively.
"We attribute the decline in corporate and infrastructure Sukuk in large part to cheap and ample bank liquidity, which has made issuers less reliant on the capital markets, said Standard & Poor's credit analyst Karim Nassif. The overall small pool of Sukuk issuers, and seasonal factors such as the early Ramadan this year, have also played a role."
"We nevertheless believe corporate and infrastructure Sukuk issuance will increase again over the next few years as companies' refinancing needs grow and as entities establish themselves as Sukuk issuers," said Nassif.
The report reads corporate and infrastructure issuance is likely to
remain more volatile and difficult to predict than total Sukuk issuance.
It will likely remain largely a function of the specific needs of the corporate and infrastructure entities that comprise the pool of Sukuk issuers in the GCC and Malaysia.
Enduring high levels of bank liquidity and uncertainty among
investors about compliance standards continue to hold back growth of the
corporate and infrastructure Sukuk market, the report says.
"The creation of local or regional institutional investment frameworks -for example, to enable pension or insurance funds to invest in Sukuk - would go some way, we believe, toward creating a deeper and more liquid Sukuk market," said Nassif.
