GCC leads decline in global sukuk issuance

The Gulf Co-operation Council (GCC) region led the decline in global sukuk issuances in the first half of this year, according to a study released yesterday.

Global sukuk issuances continued to decline in the first half of this year, reaching $9.23 billion (Dh33.8bn) at the end of June 30, 20 per cent less than the same period last year, said London-based Islamic Finance Information Service (IFIS).

However, it expects that the Gulf recovery will begin in the first quarter of next year. This year, South East Asia returns to dominate the sukuk market with total issuances reaching $7.8bn, representing 88 per cent of total global sukuk issuances for the first half of 2009. Only 12 per cent of the issuances came from the Gulf, with total worth of $1.1bn.

While Malaysia has usually dominated the global and South East Asian sukuk markets, the crisis seems to have created an opportunity for Indonesia to play a more significant role.

Indonesia's sukuk issuance in the first half has grown by an impressive 93 per cent year-on-year, reaching $1.47bn.

The first half has also witnessed the very first sukuk market developments in Singapore with the announcement of the reverse enquiry sukuk by the Monetary Authority of Singapore and the first actual sukuk in Singapore by City Developments Limited worth $66.45 million solely arranged by CIMB Islamic.

AmInvestment Bank top?ped IFIS H1-2009 sukuk arrangers and bookrunners rankings followed by Bank Negara Malaysia (BNM). BNM's ranking was boosted by the MR5bn (Dh5.2bn) retail sukuk in May. CIMB Islamic and HSBC Amanah have fallen to third and fourth places respectively.

The report further details some recent high profile defaults, and discusses the possibility of Nakheel defaulting on its $3.5bn sukuk.

The report concludes with future prospects of the sukuk market. In the GCC, three main issues are hindering the revival of the sukuk market, namely, troubled Kuwaiti investment firms, the real estate market in the UAE, and the availability of credit in Saudi Arabia.