Global sovereign long-term sukuk issuance will grow modestly this year, continuing the expansionary trend of the past few years, said Moody’s in a new report.

Larger issuers are driving growth in overall volumes, even as some smaller issuers have not sought to refinance maturing repayments, leading to greater market concentration.

 "Sovereign long-term sukuk issuance will rise to nearly $75 billion this year from $71 billion in 2019," said Christian de Guzman, a Moody's senior vice president and the report's co-author. "We expect that wider fiscal deficits, larger scheduled repayments and a deepening of domestic Islamic financial markets will lead to higher sukuk issuance over the coming years."
 
Key points:

•    Issuance in 2020 would likely surpass our forecasts should oil prices stabilize at the current levels of $25-$35 per barrel, lower than our average oil price assumption of around $43 per barrel for the full year.

•    Saudi Arabia, Indonesia and Malaysia will continue to increase the share of domestic sukuk in their fiscal deficit financing.

•    Furthermore, Moody’s expects that Turkey (B1 negative) will be a prominent sukuk issuer as it was in 2019.

•    Issuance by GCC governments increased 13.5 per cent in 2019 despite the fall in their combined fiscal deficits to $43 billion in 2019 from $54 billion in 2018.

•    Saudi Arabia's domestic issuance, which rose to $19.1 billion from $13.0 billion, accounted for nearly the entire increase in GCC issuance.

•    By 2021, however, Moody’s expects that total sovereign long-term sukuk issuance will decline slightly to around $70 billion, largely driven by lower funding needs in Saudi Arabia.

•    Also, the integration of environmental, social and governance (ESG) considerations into investment mandates is likely to be a factor driving the development of green sukuk offerings. – TradeArabia News Service