Market raises $47.1bn from 53 bond issues

Islamic finance continued to show phenomenal growth with the global volume of sukuk issued rising by 73 per cent to $47.1 billion (Dh172bn) during 2007 despite slowdown in all other financial sectors.

The sukuk market continues to enjoy a year-on-year increase despite a slowdown in the rate of growth, the report, Sukuk in 2007: Key Trends and Market Highlights, said.

The report indicates that despite the rise, there has been a decline in growth rates, as the 2007 increase is lesser than that witnessed in 2006 when it stood at 125.75 per cent. IFIS, which is owned by global publishing company Euromoney Institutional Investor, revealed in its report that the total number of sukuk issued was 207 in 2007, compared with 199 in 2006 and 89 in 2005.

In terms of value, the number of sukuk issued in 2007 added up to $47.099bn compared with about $25bn in 2006 and $10bn in 2005.

“There was, however, a drop in the number of sukuk issued in Southeast Asia, mainly as a result of a fall in Malaysian corporate medium-sized issuance. Despite this, Malaysia remains the world’s leader in sukuk issuance by both number and value, with 2007 trade totalling about $25bn,” the report said.

In addition, the Malaysian ringgit remains the most common currency for sukuk issuance, followed by the dollar. In Malaysia, most sukuk are issued in ringgits, while in the GCC, the majority are issued in dollars.

Firas Abi Ali, IFIS’s senior analyst and product manager, said: “We expect the number of issuances to continue to increase, both for corporate borrowers and for sovereign borrowers, especially in the GCC. The market weathered the global credit turmoil rather well and showed strong resilience,” he said.

The number of sukuk issued in Malaysia will continue to exceed the number issued in the Gulf countries.

“However, with the tendency for mega-sukuk expanding in the GCC, we would not be surprised if the total value of sukuk issued there were to exceed that of Malaysia in the coming year or two,” he said.

According to the report, Pakistan was the fastest growing market in 2007, enjoying a substantial rise in volumes, with the number of sukuk issued rising to 20 from four in 2006. Another remarkable feature of 2007 was the explosion in the number of sukuk worth more than $1bn. There were 14 such issues in 2007 spread among Malaysia, the UAE and Saudi Arabia.

FEWER CORPORATE SUKUK

A distinct feature of the 2007 sukuk, or Islamic bond, market has been the decrease in the number of corporate sukuk issued and yet the increase in their value.

Last year, 156 corporate sukuk were issued, compared with 167 in 2006 and 86 in 2005 but their value has been growing consistently, rising to $37bn in 2007 from $21bn in 2006 and $11bn in 2005.

This decrease in the number of issued sukuk has come mostly from Malaysia, where the number of corporate issuances fell to 112 in 2007 from 148, although as in the GCC, the total value of these issuances rose, increasing to $22.9bn from $13.7bn.

However, the number of corporate sukuk in the GCC grew to 21 in 2007 from 13 in 2006 and 10. Also, the value of these sukuk rose too, rising to $13.5bn in 2007 from $6.8bn in 2006 and $2bn in 2005.