GCC support to drive global sukuk issuances to $170 bln in 2020: S&P

GCC countries and core Islamic finance markets are expected to drive growth in global sukuk issuances this year, rating agency S&P said in a report.

Total sukuk issuance is set to witness a 5% increase year-on-year to $160 billion and $170 billion in 2020, from $162 billion in 2019, it added.

The 2019 issuances were supported by Saudi Arabia’s higher issuances of local currency-denominated government sukuk under its unlimited program. The Debt Management Office (DMO) also completed the first 15-year public sukuk issuance, setting a new benchmark for potential government and private sector issuers.

In December, Fahad Al-Saif, president, DMO, told Argaam that the Kingdom is targeting domestic and international debt issuances worth SAR 76 billion in 2020. Read: Saudi Arabia eyes SAR 76 bln debt issuances in 2020: DMO President

Elsewhere in the region, Kuwait’s central bank continued to offer sukuk as liquidity management instruments for local banks.

While issuance volumes increased slightly in Bahrain, but dropped marginally in the UAE as corporates front-loaded their issuance programs in 2018 to prepare for less supportive market conditions.

In the wider Middle East, Turkey increased its volumes, with total sukuk issuance of $13.8 billion last year, compared with $8.4 billion in 2018.

Turkish issuers have been under significant pressure in recent months given their major reliance on external debt and declining rollover ratios, the report added.

While adoption of new data technology such as blockchain is expected to ease documentation and increase issuance volumes, the rising demand for “green sukuks” is likely to help boost issuance volumes.

Meanwhile, S&P said a protracted conflict could undermine confidence and investment in the region as event risk has rapidly escalated in the Gulf region following recent developments between Iran and the US.

The consultancy said that investors could focus on more stable countries, given the current regional geopolitical situation that could lead to increase in funding costs and lower appetite for regional instruments.