The industry has maintained strong growth rates post the global financial crisis as issuers returned to the market and the slower than expected global economic recovery pushed investors into fixed income instruments, which in turn led to better credit terms for issuers of conventional bonds and sukuk. Renewed struggles in Europe has hampered growth in advanced economies, leading to capital flows into emerging markets and alternative investments. Despite this, economic growth in 2012 is estimated to have remained subdued even in emerging economies on the back of lower global demand for goods and services. This sustained sentiment has kept investors in the bond markets in a year that has seen benchmark 10-year US Treasury yields lose 9.3%.
In 2012, a total of USD131.2bln worth of sukuk papers were recorded from the primary market, representing a y-o-y increase of 54.2%. The amount dwarfs that of previous years and even represents three times the size of the primary sukuk market pre the global financial crisis. Since 2008, total yearly issuances have grown at a compound annual growth rate of 67.4%.
By region, issuances from Central and East Asia continued their growth momentum, climbing by 60.1% y-o-y to USD104.8bln during 2012. This was led by Indonesia (+131.1% y-o-y, USD6.0bln) and Malaysia (+59.4% y-o-y, USD97.1bln). Meanwhile, issuances from the Middle East and North Africa also increased by 34.4% y-o-y to USD26.3bln, mainly led by the 278.2% y-o-y jump in issuances from Saudi Arabia to USD10.5bln and the 49.3% y-o-y increase in issuances from the UAE to USD6.1bln.
Within the corporate sukuk market, USD26.8bln worth of papers or 73.5% of total issuances were issued in Malaysia, while USD4.2bln (11.5%) was issued in the UAE and USD3.4bln (9.3%) was issued in Saudi Arabia. The largest corporate issuance for the year was the USD9.7bln worth 23-tranche sukuk Musharakah issued by Projek Lebuhraya Utara-Selatan (PLUS) Berhad, followed by the USD1.0bln worth perpetual sukuk Mudharabah issued by Abu Dhabi Islamic Bank (ADIB).
Global sukuk outstanding rose to USD231.4bln at the end-2012 from USD178.2bln at the end-2011 representing y-o-y growth of 29.9% (2011: 23.5%).
In terms of total return performance, the HSBC/Nasdaq SKBI Total Return Index, which tracks the return of an emerging sukuk portfolio consisting of 46 USD/GBP/JPY/EUR-denominated fixed/floating rate vanilla issuances, returned 9.69% during 2012, up from 7.13% in 2011.
Based on the issuance momentum seen in 2012, the global sukuk issuance for 2013 is expected to illustrate strong but moderated growth of 20%-30%, supported by the following:
(Zawya / 16 Feb 2013)
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com