KUALA LUMPUR: The global sukuk market witnessed a rebound in 2016 after three consecutive years of decline, with Malaysia continuing to be the main driver, said the Malaysia International Islamic Financial Centre (MIFC).
Malaysia’s issuance totalled US$34.7 billion (RM153.03 billion) or 46.4% of total global issuances of US$74.8 billion, according to MIFC’s 2016 Global Sukuk Market report.
The US$74.8 billion global issuance represented a 13.2% growth over the previous year, the report said, adding that the primary sukuk market is expected to gain momentum in 2017.
This year’s issuances are expected to come predominantly from corporate issuances in Malaysia, Gulf Cooperation Council (GCC) countries, the Middle East and North Africa.
For 2016, the major sukuk issuers after Malaysia were GCC countries with a 26.2% market share, Indonesia (9.9%) and Turkey (5.5%). The report said GCC countries’ total issuances rose to US$19.6 billion from US$18 billion in 2015.
“Higher issuances from this region (GCC) suggest [that] sukuk remains an important source of funding in financing their budget deficits amid low oil prices and export earnings.
“Elsewhere, Turkey recorded a notable rise in sukuk issuance at US$4.1 billion for the year, supported by a number of sovereign issuances with maturity from one to five years.
“The year 2016 also witnessed issuances from Senegal, Jordan, Ivory Coast and Kuwait,” said MIFC.
Outstanding global sukuk as at December 2016 had increased to a record US$349.1 billion, up 8.7% compared with US$321.2 billion as at end-2015.
“By domicile, Malaysia’s secondary sukuk market stood at US$183.8 billion, representing a 52.6% share of total outstanding sukuk. This was followed by Saudi Arabia and the United Arab Emirates with market shares of 16.3% and 8.9% respectively.”
There was also a notable shift in composition of sukuk issuers in 2016, it added.
“In contrast to historical trends where issuance was driven by sovereigns, corporate issuers dominated the market in 2016, producing a volume of US$47.3 billion or a 63.2% share.
“These issuances were mainly from the financial services sector, accounting for 80.7% of total issuances by corporates globally. In Malaysia, among the issuers were DanaInfra Nasional Bhd, MEX II Sdn Bhd and TNB Global [Ventures Capital Bhd].”
In terms of currency, the US dollar accounted for 48.9% of total issuances, in line with broad expectations of a strong dollar environment following the US Federal Reserve’s interest rate hikes.
This was followed by ringgit-denominated sukuk representing a share of 27.9% and rupiah-denominated sukuk with a 6.6% share.