S&P: Sukuk issuance dropped 27% in H1

Syndicated deals executed in the first half of 2020 totalled $50.1 billion in the core Islamic finance countries, which represented about 40% of total transactions in2019, said S&P Global Ratings in a new report.

By contrast, total sukuk issuance dropped 27% in the first half of this year. “We've observed some improvement recently however, suggesting that the steep drop in sukuk issuance volumes might not be indicative of the market's full-year performance,” said S&P in the report.

The Islamic syndicated loans market has been modestly outperforming the sukuk market this year, the report said, noting that Islamic syndications could increasingly complement traditional financing options.

Islamic countries tend to seek conventional financing in times of crisis. This year, GCC governments and government-related entities have tapped the conventional markets for bonds and syndications more often than the sukuk market. There are several reasons for this, but the most common relates to the complexity of issuing Islamic instruments, particularly sukuk, due to a lack of standardization. Faster execution and larger amounts are the main factors behind GCC sovereigns' decision to take the conventional funding route in 2020.

Governments' heightened need for financing stems largely from the oil price slump and the economic fallout of the Covid-19pandemic. The last time we saw a similar surge in conventional issuance was in 2015.


Source: Trade Arabia