Global issuance of Islamic bonds, or sukuk, in 2018 will likely be maintained at around the record US$100 billion level achieved last year, according to Moody`s Investors Service (Moody`s).
After jumping 17% to $100 billion in 2017, sukuk issuance will "remain relatively flat in the $90 billion-$100 billion range, driven largely by sovereigns, although the recent recovery in oil prices could potentially lower financing needs", the ratings agency says in a March 13 report.
The corporate and asset-backed sukuk market had a muted 2017 as issuers sought more attractive opportunities in the conventional bond market, and Moodys forecasts more of the same this year.
"However, corporate and asset-backed sukuk issuance could be a source of growth underpinning the long-term potential of the industry," it says.
According to Moodys, Malaysia will continue to dominate global sukuk volumes in both long and short-term issuance.
"We expect sukuk issuance among Islamic financial institutions (in Malaysia) will grow 10-13% year-on-year in 2018. The bulk of such issuance will be denominated in ringgit, similarly to previous years," it says.
Issuance among Islamic financial institutions in Indonesia is expected to "remain fairly weak although recovering somewhat from 2017s low levels amid stabilisation in the domestic operating environment", according to the report.
Meanwhile, Moody`s predicts the Islamic finance sectors growth will "continue to outstrip the growth of conventional assets across core Islamic finance markets in coming years", thanks to higher demand for shariah-compliant products.
The report notes that Islamic banking penetration in Gulf Cooperation Council (GCC) countries stood at 45% at end-September 2017, up from 31% in December 2008.
Annual sukuk issuance in the GCC more than doubled from $42 billion to $100 billion between 2008 and 2017, it adds.
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