Published on 01 Aug 2019.
As at end-June 2019, global sukuk issuance had reached USD72.7 bil - exceeding the lower range of RAM Ratings’ full-year projection of USD70 bil-USD80 bil for 2019. As such, RAM has revised its full-year expectation to US80 bil–USD90 bil. This is based on the Bank Negara Malaysia’s (BNM) better-than-expected issuance of Islamic securities, the Indonesian government’s commitment to supporting its Islamic finance agenda, as well as its role in raising awareness of sustainable and responsible investments (SRI), expectations that the GCC’s public sector sukuk issuance will provide a sustainable baseline and potentially account for a higher proportion of its funding mix.
Going into the second half of the year, RAM expects Malaysia to retain its pole position as the sukuk market leader in 2019, underpinned by solid support from the Government, BNM and the private sector. As at end-June 2019, the gross issuance value of the Malaysian sukuk market had surpassed RAM’s projection of RM100 bil–RM120 bil for the entire year. The 38.3% surge to RM136.9 bil (end-June 2018: RM99.0 bil) was primarily driven by a 61.1% spike in BNM’s issuance of Islamic securities to RM14.5 bil, followed by the corporate sector with RM65.1 bil (+55.5%) (including a RM27.6 bil one-off issue from Urusharta Jamaah Sdn Bhd - an SPV set up by the Ministry of Finance ) and government issues (+9.9% to RM39.0 bil). Given the dearth of high-quality liquid assets (HQLA) for Islamic financial institutions (IFIs) vis-à-vis complying with BNM’s liquidity coverage ratio (LCR), we anticipate BNM’s issuance of Interbank Islamic Bills to accelerate further this year. Nevertheless, its future performance will be subject to market demand and liquidity, which appear promising at the moment.
Meanwhile, there have been regulatory developments in Malaysia and Indonesia, to position themselves at the forefront of ASEAN’s SRI industry. The common values between SRI and sukuk have played a part in the promotion of sukuk to finance SRI-related initiatives. As green and SRI sukuk gain momentum in these two countries, we envisage some ripple effects for other core sukuk markets in the coming years vis-à-vis driving the SRI agenda. As observed by Ruslena Ramli, RAM’s head of Islamic finance, “The upbeat prospects of the SRI sukuk segment is likely to have a tremendous multiplier effect on the staging of the next phase of growth for global sukuk.”
RAM’s Sukuk Review 1H 2019 is available to subscribers through our website, www.ram.com.my. Non-subscribers may purchase the report at RM500 per copy.
Irfan Afifah Mohd Zaki
(603) 3385 2551
(603) 3385 2577
AIN Sulaiman/Faiez Zulkifli
(603) 3385 2596/2597
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