Sukuk markets to benefit in 2H20 from pandemic stimulus packages

by TMR / graphic by MZUKRI

THE Covid-19 pandemic-induced stimulus packages are expected to set the pace of issuance of Islamic bonds or sukuk in the second half of 2020 (2H20), said RAM Rating Services Bhd (RAM Ratings).

In a statement yesterday, the rating agency said global sukuk issuance dropped 9.1% year-on-year in 1H20, bringing the total issuance value to US$65.6 billion (RM272.24 billion) from US$72.1 billion last year.

Sovereign issuance fell 17.1% to US$39.2 billion this year compared to US$47.2 billion in 1H19.

Despite expectations of a sluggish performance by the global sukuk market this year, lower yields and key sukuk markets’ Covid-19-induced stimulus packages took centre stage in 1H20.

“Sovereigns and corporates took advantage of low-interest rates to lock in cheaper financing,” RAM Ratings said yesterday.

It added that the slower time-to-market in sukuk issuance could have led to some sukuk markets to choose conventional bonds to fund against the pandemic disruption.

The quasi-government and corporate sectors posted a 6.1% growth, with US$26.4 billion coming to market in 1H20.

Malaysia remained the leading global sukuk market in both the corporate and quasi-government sectors, taking up the lion’s share of 41.5% or US$11 billion, followed by Saudi Arabia at 26.3% and the United Arab Emirates at 15.3%, it said.