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Fitch Ratings said that while global sukuk issuance faces near-term uncertainties amid ongoing macro volatility, the pipeline for issuance in the second quarter of 2023 is building.
Oil production cuts by OPEC+ members – nearly 1.2 million barrels per day from May until the end of 2023 – should support short-term oil prices (2023: $85/bbl).
High oil prices will reduce the need for new financing in many core oil exporters. However, seek to diversify your funds. Many core oil-importing countries such as Malaysia and Bahrain still need funds, and budget deficits are expected to occur in 2023.
core market
Sukuk issuance in the core market (1Q23: US$45.3bn) fell 18.5% qoq. Bashar Al-Natoor, Fitch’s Global Head of Islamic Finance, said: “Ongoing macro volatility and uncertainty, a contraction in global liquidity and investor risk appetite, and monetary tightening are affecting Sukuk and bond issuance in regions where Islamic finance is active.” However, the liquidity and investment preferences of Islamic investors continue to support the long-term development of Sukuk.” New changes to Sukuk documentation related to AAOIFI Shariah compliance are still taking place.
All Fitch-rated international sukuk issues in 1Q23 were investment grade. Outstanding ESG-sukuk reached USD 25.9 billion; up 5.7% MoM.
Until market confidence returns, the liquidity positions of the global banking sector will continue to be under scrutiny. In the GCC (excluding Saudi Arabia), the liquidity position of Islamic banks, which are major investors, issuers and arrangers of Sukuk, is generally intact. However, Saudi banks’ liquidity position will be challenging through 2023 as credit growth remains high but is slowing. However, if credit growth exceeds deposits, SAMA may inject more liquidity.
Despite volatility, the Sukuk market has become more diverse. Air Lease Corporation issued the largest sukuk from a US company, the first UAE dirham sukuk from a UAE bank, and also issued the first project finance sukuk. In addition, Egypt issued its first sovereign sukuk. — trade arab news agency
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