Market confident: Survey of 44 lead arrangers and 106 investors reveal market confidence: most expect a boost in sukuk issuance in 2015, to be between $150 billion and $174.9 billion
Supply growing: Global sukuk issuance expected to reach $250 billion by 2020
Bahrain, December 2014 – Thomson Reuters , the world’s leading provider of intelligent information for businesses and professionals, released today the findings of its third consecutive Sukuk Perceptions and Forecast study at the 21st Annual World Islamic Banking Conference (WIBC 2014). The study is based on a survey of sukuk lead arrangers, investors, and other key market players such as regulators, legal advisors, and rating agencies predominantly based in Islamic markets in MENA and Southeast Asia. The survey was conducted in August and September 2014. The primary empirical data gathered from the survey was subsequently developed to provide forward-looking analytics on the appetites and preferences of sukuk investors for 2014 and beyond. In this year’s report, we have also gathered opinions of seven key market players pertaining to sukuk demand, oversubscription, government support, and future outlook.
Overall, the study found that the potential demand and supply pipeline of sukuk is expected to grow. Despite this increase, demand is still expected to outstrip supply substantially until 2015, when it is predicted supply will begin to outpace demand.
Total global outstanding sukuk stands at $241 billion, with around $110 billion sukuk issued in 2014. Global outstanding sukuk is expected to grow to $907 billion by 2020.
For the first 9 months of 2014 19 jurisdictions tapped the sukuk market – the highest number in sukuk market history.
Non-Shariah-sensitive investors look primarily for attractive yields then investing in sukuk as a source of diversification. These investors could turn to alternatives once the supply and demand gap narrows.
The sukuk supply and demand gap is expected to marginally dip to $227 billion by 2015.
The gap is expected to then further drop steadily as market issuance is predicted to reach $196 billion by 2020.
Investors view the UK as the most attractive emerging Islamic finance market for sukuk investment while lead arrangers also expect that more sukuk would be issued from the UK.
Dr. Sayd Farook, Global Head of Islamic Capital Markets for Thomson Reuters , said: “The global sukuk market in 2014 has picked up in terms of new issuance and we see more positive signs in 2015 following the five sovereign and three corporate debutantes which have increased the level of confidence for issuers to consider sukuk. The debutante sovereigns and corporates of 2014 may not continue to tap the sukuk market but supply growth will not fall off in their absence. Critically, we are seeing increased support from governments, with a number of countries finalising regulations to allow the issuance of sukuk in their local markets. Countries such as Egypt, Jordan, Morocco, Oman, and Tunisia have shown great interest in issuing sukuk in 2015, particularly to support and fund infrastructure projects.”
He continued: “Nevertheless, a number of challenges that limit the growth of the sector need to be solved. Deficiencies still persist in areas such as transparency, standardisation, and liquidity in the secondary market, mainly due to limited trading mechanisms and the different treatment of certain structures in different jurisdictions.”
Sponsored by Thomson Reuter strategic partner Barwa Bank, platinum sponsor Türkiye Finans, and gold sponsor NASDAQ Dubai, the Sukuk Perceptions & Forecast 2015 will be launched at the World Islamic Banking Conference on 3rd December 2014 in Bahrain.
Originally published on www.zawya.com