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Global Sukuk issuance is expected to slow to $185 billion by 2022, according to the 2022 Sukuk Perceptions and Predictions Study published by London Stock Exchange Group (LSEG) company Refinitiv.
According to Refinitiv’s 2022 Sukuk survey, some 41% of respondents said they remain bullish on the growth of global sukuk supply. The report, titled “Navigating the New Environment,” expects global sukuk issuance to grow at a compound annual growth rate of 6.8 percent over the next five years, reaching $257 billion by 2027.
The report showed that despite strong activity by issuers at the beginning of the year to capitalize on high demand from international investors, the momentum of international sukuk issuance started to slow in the first half of 2022.
Mustafa Adil, head of Islamic finance at Refinitiv, part of LSEG, said: “2021 set a new record for sukuk issuance for the fifth year in a row, with a total of US$196.5 billion. Although this is an 8.2% increase from 2020’s US$181.6 billion, it is not the same as the previous five years. The average annual growth rate of 21% is much higher.”
“Global sukuk issuance raised $100.9 billion in the first half of 2022, down slightly from $104.2 billion in the first half of 2021. Despite a strong start to the year, issuance momentum has slowed as the Federal Reserve and other central banks embark on a global monetary tightening cycle.
“The surge in oil prices also contributed to a slowdown in issuance as it reduced government borrowing needs in the core sukuk market. USD sukuk issuance in the first half of 2022 was $22 billion, down 10% from $33.2 billion in the first half of 2021, The reason is that issuers have concentrated their borrowing in the domestic market, while the Fed’s tightening policy has strengthened the dollar,” he added.
Malaysia, Saudi Arabia and Indonesia remain the largest distribution bases for sukuk, together accounting for 75% of sukuk issued in 2021 and the first half of 2022.
In Saudi Arabia, sukuk raised $28.1 billion in the first half of 2022, compared with $24.2 billion in the same period in 2021, despite soaring oil prices. Still, issuance slowed in the second quarter as the kingdom posted a surplus due to higher oil revenues.
As with most GCC governments, the issuance of new and ongoing infrastructure projects may be offered to support once volatility in global financial markets has calmed down. The same is true for ESG sukuk issuance in the region awaiting more favourable conditions.
Sovereign bonds continue to drive sukuk issuance, holding around 60% of global issuance since 2017. Sovereign sukuk issued in the first half of 2022 totaled US$68.8 billion, of which 83% were issued by the governments of the Gulf Cooperation Council, Malaysia and Indonesia. The Saudi government was the largest sovereign issuer in the first half of 2022 with an offering of $22.1 billion, even as soaring oil prices reduced government funding needs. – arab trade news agency
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