Islamic Finance

Biggest Q1 sukuk issuers Malaysia, Indonesia, Saudi but Kuwait, Turkey rising - RAM Ratings

Global sukuk issuance hit $39.5 billion for the first three months of 2019, a jump of 38 percent from the same period last year, according to Malaysia’s RAM Ratings.

Malaysia, Indonesia and Saudi Arabia are the top three issuers, but the credit rating agency told Salaam Gateway Kuwait and Turkey will also drive the sukuk market this year.

Issuances from Malaysia accounted for 35.1 percent of all sukuk in the first quarter of this year. The $13.9 billion worth of sukuk from the Southeast Asian nation represented a 54.4 percent spike compared to only $9 billion a year earlier.

Sukuk out of Indonesia reached $6.7 billion in the first quarter, accounting for 17 percent of all issuances, followed by $6.1 billion from Saudi Arabia, equivalent to 15.3 percent.

RAM expects global sukuk issuance to hit $70 billion - $80 billion in 2019, and said first quarter performance “bodes well” for its projection. It put sukuk issuances at $94.4 billion for 2018, beating its own projection of $75 billion - $85 billion.

“Analysing Malaysia’s performance in Q1 2019, growth was largely driven by Bank Negara Malaysia (BNM) Interbank Islamic Bills (BNIB-i),” RAM Ratings head of Islamic finance Ruslena Ramli told Salaam Gateway on Thursday.

The BNIB-i was introduced in March 2018 in line with Malaysia’s Financial Market Committee’s initiatives to support liquidity development for the onshore financial market.

“As at end-March 2019, BNM Islamic securities swelled to 11.2 billion Malaysian ringgit from only 1 billion ringgit at end-March 2018,” said Ramli.

She sees BNIB-i issuances growing further this year due to its recognition as a high quality liquid asset (HQLA).

“Key markets to watch are Indonesia, as the nation gears up for sovereign sukuk issuances in line with its sustainability agenda, and Saudi Arabia, whose persistent budget deficits may lead to a higher percentage of sukuk in its government funding mix,” Ramli wrote in a media statement on Monday.


The ratings agency is also keeping a keen eye on two markets, Turkey and Kuwait. 

Turkey has been “bucking the trend”, said Ramli.

Turkey’s sukuk issuance was $4.9 billion as at the end of March from $378 million from the same period in 2018, according to Ramli. This is a hugely substantial rise of 1,196 percent.

“Its issuance value jumped 76 percent to $3.9 billion as at end-2018 (end-2017: $2.2 billion). The driving force behind this was its financial sector, in an effort to meet the issuers’ regulatory capital requirements,” said Ramli.

Kuwait is the other one to watch. At the end of March, Kuwait’s sukuk issuance reached $2.1 billion, RAM said.

“Similar to BNM, Kuwait Central Bank has been consistently issuing sukuk since 2018, to manage the liquidity of Islamic banks. Kuwait sukuk issuance surged 374.5 percent to $3.6 billion as at end-Dec 2018 from only $750 million in 2017,” Ramli told Salaam Gateway.


“Moving forward, the momentum of the global sukuk market appears more upbeat in support of the SRI sector,” said Ramli.

In June 2015, Malaysia issued its first SRI sukuk, a 100 million ringgit sale by sovereign wealth fund Khazanah. It was issued under Securities Commission Malaysia’s SRI sukuk framework launched in August 2014.

Since then, in July 2017 Tadau Energy, also issuing out of Malaysia, sold the country’s—and the world’s—first green sukuk.

Moody’s Investor Service last week said that only 1.6 percent of the $47.2 billion in green bonds issued in the first quarter of 2019 were sukuk, writing that the Shariah-compliant sector is “still in its infancy”.

That 1.6 percent refers to the $750 million green sukuk issued in February by the Indonesia government.

Only five green sukuk were issued between July 2017, when Tadau went to market, and the end of March this year.

The sixth, and latest, came from UAE’s Majid Al Futtaim in May. The $600 million 10-year green sukuk is the first by a corporate in the Middle East.

SRI and green bonds and sukuk bear the same structures and characteristics of similar standard instruments, except that their proceeds are dedicated to socially responsible and green initiatives, which include climate or environmental projects.


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(Reporting by Emmy Abdul Alim; Editing by Seban Scaria)

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