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Muted Sovereign Activity Still Pressuring 2023 Sukuk Issuance, Says Moody’s
Sep 05, 2023
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4 min read
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Moody’s Investors Service says Malaysia will continue dominating global sukuk issuance, with issuance mostly denominated in ringgit. – AFP pic, September 4, 2023.MOODY’s Investors Service said global sukuk issuance will continue to decline this year on lower volumes from major sovereign issuers, mostly reflecting an improving fiscal position across the Gulf Cooperation Council (GCC) countries and Southeast Asia.
Total gross short- and long-term sukuk issuance would likely amount to between US$150 billion (RM698.2 billion) and US$160 billion this year, down from US$178 billion last year, said the rating agency.
“Issuance activity was US$66 billion in the first half (H1) of 2023, down from US$92 billion a year earlier, as lower-than-expected sovereign activity in the GCC and Southeast Asia more than offset a strong rebound by corporate and financial institution issuers.
“We expect issuance of US$80-US$90 billion in H2 2023, supported by a partial rebound in Southeast Asia and Turkey, as well as sustained strong volumes from corporate and financial institutions,” it said in a statement today.
Moody’s said sukuk issuance volumes fell by 28% to US$66 billion in H1 2023, reflecting muted activity in Saudi Arabia, Indonesia and Turkey.
Hence, the rating agency expects global sukuk issuance to decline for the third consecutive year in 2023 after peaking at US$205 billion in 2020.
Back home, it projects Malaysia will continue dominating global sukuk issuance, with issuance mostly denominated in local currency.
It said private-sector actors are likely to continue to turn to the sukuk market for funding and investments.
“The Malaysian government, which remains a proponent of Islamic finance and continues to support the development of the domestic sukuk market, had in 2022 announced several initiatives to promote further growth in the industry.
“Malaysia’s wide, albeit declining, fiscal deficit, which we expect to be around 5% of GDP in 2023-2024, could bring additional sovereign volumes by the end of the year,” it said.
On long-term growth prospects, Moody’s anticipates the sukuk market to continue to hold significant growth potential in the coming years, supported by the entrance of new issuers that will meet the increasing demand for sukuk instruments.
“Indeed, the growing popularity of Islamic products beyond core Islamic markets, the rising demand for green and sustainable sukuk, and the increasing sophistication and diversity of Islamic instruments will enlarge the pool of potential investors,” it said. – Bernama, September 4, 2023.
Source:
- Muted sovereign activity still pressuring 2023 sukuk issuance, says Moody’s (2023, 04 September). The Malaysian Insight. Retrieved from https://www.themalaysianinsight.com/s/460510
- Muted Sovereign Activity Will Continue to Pressure Sukuk Issuance This Year -- Moody's (2023, 04 September). Bernama Market News. Retrieved from https://www.bernama.com/en/market/news.php?id=2222407
Disclaimer
The information provided in this report is of a general nature and has been prepared for information purposes only. It is not intended to constitute research or as advice for any investor. The information in this report is not and should not be construed or considered as an offer, recommendation or solicitation for investments. Investors are advised to make their own independent evaluation of the information contained in this report, consider their own individual investment objectives, financial situation and particular needs and should seek appropriate personalised financial advice from a qualified professional to suit individual circumstances and risk profile.
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