This article first appeared in The Edge Financial Daily, on March 9, 2016.

KUALA LUMPUR: Global sukuk issuance is expected to drop in 2016 to between US$55 billion (RM225.50 billion) and US$65 billion amid ebbing global market sentiment, particularly in Malaysia, said RAM Rating Services Bhd.

Last year, sukuk worth US$66.4 billion were issued worldwide.

The rating agency said its projection takes into account the core sukuk markets of Malaysia and the Gulf Cooperation Council (GCC) member countries' government expenditure cuts and potential delays in infrastructure spending.

“While Malaysia and the GCC will remain the leaders in global sukuk issuance, supported by the funding requirements of the corporate and quasi-government sectors, we envisage Indonesia in 2016 will still have the economic momentum to play a more significant role in tapping the global sukuk market to fund its government budget,” RAM head of Islamic finance Ruslena Ramli said in its 2016 Sukuk Outlook Report yesterday.

Historically, more than 90% of global sukuk issuance has originated from Malaysia, the GCC and Indonesia.

Ruslena said another encouraging trend is the rising number of sovereign sukuk issues in 2014 and 2015, which are anticipated to spill over into 2016 and increase the number of countries that are keen on expanding their domestic sukuk markets.

“We have also analysed the sukuk markets of the GCC member countries; the widening deficits of nations that are more dependent on oil exports could prompt the issuance of sovereign sukuk,” she added.