Asia’s sovereigns have issued a slew of Sukuk in March; in a sure sign that government and government-related debt will continue to dominate the market this year.
Among sovereign and quasi-sovereign Sukuk that have been issued this year include a BN$100 million (US$79.29 million) short-term Sukuk Ijarah issuance from the Autoriti Monetari Brunei Darussalam, the monetary authority, on the 8th March. While remaining under the radar, this is the Brunei’s government 69th issuance of short-term Sukuk; amounting to BN$3.75 billion (US$2.97 billion)-worth of short-term Sukuk since April 2006.
Meanwhile, Indonesia’s government raised IDR1.66 trillion (US$180.94 million) in a Sukuk auction on the 13th March, while its retail Sukuk auction is set to close today; and Malaysia’s Khazanah Nasional issued a US$358 million exchangeable Sukuk.
The activity in the sovereign Sukuk market is also in tandem with the preference seen for emerging market assets that has arisen as a result of the prevailing Eurozone crisis.
In a report on 2011 sovereign transitions and defaults, Fitch Ratings noted that: “Economic and financial disruptions emanating from the Eurozone crisis and Middle East political unrest rendered negative effects on a number of sovereign ratings in 2011. By contrast, Asia Pacific, Latin America and a handful of emerging European credits provided most of the positive sovereign rating moves; with improved growth and economic metrics a common theme.”
It also said that the accumulation of international reserves, greater monetary and exchange rate flexibility, moderate fiscal deficits, strong growth and greater resilience to shocks underpinned the broadly positive credit and ratings outlook for emerging markets last year. “With the exception of the Middle East and Africa, where the political and economic fallout from the Arab Spring took their toll on sovereign creditworthiness, emerging markets quality advanced strongly in 2011,” it added.
Fitch also commented that ratings upgrades for emerging Asia’s sovereigns also picked up momentum last year; with Indonesia as among countries which saw its credit rating move to investment grade from speculative.
source: Islamic Finance News