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Global sukuk issuance is expected to reach $90-$100 billion in 2018, in line with 2017 levels, says Moody's Investors Service. 

 

The report, "Cross-Sector - Sukuk Market Outlook - H1 2018 Update," is now available on www.moodys.com. Moody's subscribers can access this report via the link at the end of this press release. The research is an update to the markets and does not constitute a rating action.

 

Moody's expectation of broadly stable issuance for the year - despite a 12% decrease to $55 billion in the first half of 2018 - is supported by regular issuance from government and corporate entities in Malaysia (A3 stable) and Indonesia (Baa2 stable) in the second half of 2018. The decrease in sukuk issuances during the first half of 2018 was driven by lower volumes from the Gulf Co-operation Council (GCC) region.

"Over the long term, we expect sukuk issuance volumes to continue to grow as governments across the core Islamic finance markets shift their financing mix towards a combination of conventional and Islamic instruments," says Nitish Bhojnagarwala, a Vice President and Senior Credit Officer at Moody's.

 

Moody's also notes that the launch in July 2018 of a primary dealers programme for government sukuk in Saudi Arabia (A1 stable), and the start of sukuk trading on the Turkish stock exchange in August 2018, are supportive for the market.

 

Green sukuk issuance is set to accelerate in Malaysia and Indonesia as governments in both countries seek to promote sustainable policy agendas by attracting private capital into low-carbon and climate-resilient infrastructure projects. The world's first green sukuk was issued in 2017 in Malaysia, and the government of Indonesia unveiled the first sovereign green sukuk in February 2018, raising $1.25 billion.

 

The Malaysian and Indonesian precedents could encourage other issuers to enter the green sukuk market, in particular GCC governments, which aim to diversify their economies away from the oil industry.

 

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