03/12/2014 10:06 AST
The Thomson Reuters Sukuk Perceptions and Forecast 2015 survey of 44 lead arrangers and 106 investors reveals most expect a boost in Sukuk issuance in 2015 of between $150 billion and $174.9 billion. Total global outstanding Sukuk issuance stands at $241 billion, with around $110 billion Sukuk issued in 2014. Global outstanding Sukuk issuance is expected to grow to $907 billion by 2020. For the first nine months of 2014, 19 jurisdictions tapped the Sukuk market – the highest number in Sukuk market history.
2013’s global sukuk market plunged 15 per cent from 2012’s high of $137 billion worth of Sukuk. However, the report claimed good news for 2014 - total issuance for the first nine months of the year reached $99.26 billion, which is 85 per cent of 2013’s full-year value, and the market is optimistic it will break free of last year’s depression.
The recovery from last year’s low has been driven by more jurisdictions issuing Sukuk. Notable debutantes including a group of sovereigns – UK, Hong Kong, Luxembourg, South Africa, and Senegal – and corporates – a real estate company in the Maldives, Goldman Sachs, and Bank ofTokyo-Mitsubishi.
For the period under review versus full-year 2013 total sovereign Sukuk reached $63.05 billion versus $76.26 billion, quasi-sovereign total issuance was $13.61 billion versus $8.46 billion, and $22.6 billion versus $32.21 billion for corporates.
Financial institutions continue to dominate all corporate issuances, followed by issuers from power and utilities, construction, real estate, and transport.
The order book for the UK’s GBP 200 million Sukuk was reportedly GBP 2.3 billion, making the sale x12 oversubscribed. Hong Kong’s Sukuk was x4.7 oversubscribed, South Africa’ s x4.4, Goldman Sachs’ x3 times, and Luxembourg’s x2 times. The survey noted that oversubscription is driven by excess demand chasing limited supply.
Thomson Reuters expects the Sukuk demand and supply gap to narrow over the next five years, from $227.1 billion in 2015 to $195.8 billion in 2020.
2015 outlook
As Sukuk issuance approached the $100 billion mark at the end of Q3, 2014, issuers, investors and other market players expect issuance for the whole of 2014 to be in the range of $125 billion to $149.9 billion as all look to a strong pipeline for Q4, 2014, said Thomson Reuters.
Supply growth into 2015 will be driven by financing needs for infrastructure projects especially in the GCC and the wider Middle East region.
However, the Survey also reveals that about 50 per cent of investors expect to allocate between five per cent and 24.9 per cent of their portfolios to Sukuk, which is markedly lower than last year when investors indicated in the 2013 survey that they would allocate an average of 25 per cent-35 per cent to Sukuk.
CPI Financial
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