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Sovereign sukuk dominated issuance in 1H 2020 despite global contraction

Published on 03 Sep 2020.

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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 1H 2020. Sovereigns and corporates took advantage of low interest rates to lock in cheaper financing.

Global sukuk issuance fell 9.1% y-o-y in 1H 2020, bringing the total issuance value to USD65.6 bil (1H 2019: USD72.1 bil). The weaker showing followed a 17.1% reduction in sovereign issuance to USD39.2 bil in the same period (1H 2019: USD47.2 bil).

Despite the general contraction, the impressive spikes in sovereign sukuk issuance by Turkey (+56.2%) and Indonesia (+46.0%) helped cushion the declines in other key sovereign sukuk markets such as Malaysia (-69.3%) and Saudi Arabia (-46.5%). The slower time-to-market in sukuk issuance may have prompted some key sukuk markets to choose conventional bonds to fund their fight against COVID-19. That said, additional funding for stimulus packages may keep setting the pace for sukuk issuance in 2H 2020.

Interestingly, the quasi-government and corporate sectors posted a 6.1% growth, with USD26.4 bil coming to market in 1H 2020 (1H 2019: USD24.9 bil). Malaysia remained the leading global sukuk market in both the corporate and quasi-government sectors, taking up the lion’s share of 41.5% (USD11.0 bil), followed by Saudi Arabia (26.3% or USD6.9 bil) and the UAE (15.3% or USD4.0 bil).

RAM’s Sukuk Snapshot is designed as a quick reference point for sukuk data and trends. This publication aims to serve the needs of market practitioners, enabling them to monitor global and Malaysian sukuk market developments. Subscribers can retrieve the Sukuk Snapshot via our website, www.ram.com.my. Non-subscribers may purchase the report at RM500 per copy.

 

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Publication Date Published Category
Sukuk Snapshot September 2020 03-Sep-2020 Sukuk Snapshot View PDF

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