Outstanding sukuk volumes have exceeded $800 billion for the first time in second quarter, according to Fitch Ratings. However, issuance is expected to slow in the third quarter coinciding with summer vacations in many countries, before picking up pace in the very next quarter.

 

The sukuk issuance in core markets reached $49.1 billion in Q2, up 10% quarter-on-quarter (q-o-q) while bond issuance fell by 4.8%, it stated.

 

"As expected, H1 was a busy period for sukuk issuance on the back of issuers’ funding needs and diversification attempts as well as initiatives to develop the local debt capital markets," said Bashar Al Natoor, the Global Head of Islamic Finance, Fitch Ratings. 

 

"In addition to greater volumes, global sukuk markets engaged with a diverse range of issuers, currencies and geographies," he noted.

 

Fitch expects the third quarter to be cooler for the global sukuk market before picking up pace in the very next quarter.

 

The majority of Fitch-rated outstanding sukuk were investment grade at 79%, with 12.6% of issuers having a positive outlook, and 77.5% having a stable outlook. Outstanding ESG-sukuk reached $30.5 billion; up 22.5% qoq, it added.

 

The UAE issued the first Emirati dirham-denominated Treasury sukuk, which supports funding diversification initiatives and the local Islamic finance ecosystem. 

 

The first Kazakhstani tenge sukuk (A+) was issued by the Islamic Corporation for the Development of the Private Sector in 2Q23. Mexican officials are in exploratory talks to issue sukuk.

 

According to Fitch ratings, favourable regulations were witnessed. 

 

Saudi Arabia’s Capital Market Authority announced a cancellation of its share in sukuk and bonds trading commission starting from May 2023. 

 

In the UAE, the Securities and Commodities Authority issued regulations exempting companies wishing to list their green or sustainability-linked sukuk or bonds in a local market from registration fees for 2023.

 

Only 0.21% of all issued sukuk have defaulted. Sukuk recovery is still untested in most Islamic finance markets, it added.-TradeArabia News Service