Karim Nassif

Gulf sukuk issuance forecast to remain stagnant for months

Corporate and infrastructure sukuk issuance in the Gulf region and Malaysia has continued to stagnate so far this year and this may carry over to the coming quarters, according to S&P Global Ratings. Despite the slump, essential infrastructure funding requirements, low interest rates, and investors' appetite for Islamic assets in their portfolios continue to be supportive for the world's core corporate sukuk markets.

In the GCC, corporate and infrastructure sukuk issuance totalled $2.5 billion in the first eight months of 2016, compared with $2.3 billion for the preceding eight months. Versus the same periods in 2013 and 2014, issues are down sharply from $5 and $6.5 billion, respectively, S&P said.
"Further out, we see possible brighter prospects for issuing corporate and infrastructure sukuk over the medium to long term. We estimate that Gulf government spending on projects alone - including infrastructure contracts awarded over 2016-2019 - could be about $330 billion," said S&P Global Ratings analyst Karim Nassif.

S&P Report Says Greater Use Of Sukuk In The GCC And Asia Could Fund Infrastructure Needs And Develop Islamic Finance Too

According ot a report by Standard & Poor's Ratings Services, a trend to develop and globalize the sukuk market is being set. Since conventional banks worldwide tend to producing fewer and shorter loans, companies look for an alternative in terms of financing. In this case, it is very probable that Islamic financial instruments become a significant source of funding, particularly in the GCC and Asia. While these regions mark the center of a huge estimated $1 trillion market, they also need high capital for developing their infrastructure.

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