New issuance of Islamic bonds (sukuk) in Southeast Asia this year is likely to fall to around levels last seen in 2003, depressed by weak corporate spending, difficult pricing and poor demand, a Reuters poll shows.
Sales of new sukuk are expected to total at least $4 billion (Dh14.6bn) this year, compared with an estimate of at least $5bn in a similar poll in January. The region sold about $6.6bn in new Islamic bonds last year.
Government issuance, similar to Indonesia's $650 million sukuk issue earlier this month, would inject life into the ailing market. And while there are signs the global economy is stabilising, conditions are likely to remain dire until next year, most of the survey's respondents said.
"Corporates are inclined to put their capital spending plans on hold until more clarity on the economic front is obtained," said Razlan Mohamed, CEO of Malaysian Rating Corp Bhd.
"Risk aversion on the part of investors still persists given the continuous flow of negative economic data and this will continue to weigh on the demand for new sukuk and conventional issuances."
Half of the 12 surveyed in the Reuters poll predicted at least $4bn in new issuance of Islamic bonds this year, three saw at least $5bn, two at least $7bn and one at least $6bn. The last time regional sukuk issuance was near the $4bn mark was in 2003 when it totalled $4.1bn, data from Islamic Finance Information Service shows. New Islamic bond issuance in the region last year stood at $6.6bn , the lowest since $5bn in 2004.
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