Fitch: Strong start for sukuk in 1Q15 in tough market conditions
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Press release: DUBAI/LONDON: Fitch Ratings says in a new report that the total new sukuk from GCC+7 issuers rose 13% yoy in 1Q15. Total sukuk and bond issuance in 1Q15 were up 47% from 4Q14 when volumes were exceptionally weak, due to falling oil prices and rising geopolitical tension. In 1Q15, however, stability in oil prices enabled some new deals. Sukuk accounted for 26% of total new issuance, marginally down from 31% in 4Q14.
Loans (Islamic and conventional syndicated loans) in the GCC and Malaysia were down 25% in 1Q15. However, the quarter to quarter share of Islamic finance deals was up by 198% and accounted for 20% of total new loans, which came mainly from GCC’s two largest economies – Saudi Arabia and the UAE.

Two notable large sukuk issues in 1Q15 were by IDB Trust Services Limited and RAK Capital at USD1bn each. In 1Q15 the total sukuk issuance volume rated by Fitch grew 3.5% to USD45.1bn, with sovereigns and corporates taking near equal shares of sukuk issuance at 37% and 36% respectively, followed by financial institutions at 26%.

Fitch expects Islamic finance to continue growing rapidly. Issuance for new sovereigns may be seen from Jordan, Tunisia and even Egypt this year. Moreover, liquidity will become more important due to declining oil reserves and also because GCC governments are keen to continue to spend and expand. This could translate to more sukuk issuance, rather than usual easy bank financing. Islamic banks are also trying to strengthen their balance sheets in preparation for Basel III, which means tapping the sukuk market.

 

The preceding is a press release by Fitch Ratings, and does not reflect the editorial policy of The Cairo Post

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