The International Islamic Financial Market (IIFM) believes the global sukuk market will be able to sustain its expansionary phase into 2015 with total issuance likely to top the US$150 billion (RM525 billion) despite the uncertainty in the global economy.
IIFM CEO Ijlal A Alvi said the forecast is based on pipeline of issues planned and expectations of sustained demand for funds from existing Islamic financial centres and potential issuers of Shariah-based bonds from a variety of countries such as Mexico, Indonesia, Kenya and Turkey as Islamic finance gains more mainstream acceptance.
“The weaker energy prices will hit the oil and gas sector but will generally spur industrial production in economies like Turkey, so we expect a positive impact from cheaper energy prices. The demand for sukuk in the secondary market is well above supply as with the case with the perpetual sukuk ,” he said on the sidelines of the 21st World Islamic Banking Conference in Manama, Bahrain, at the beginning of this month.
Total sukuk issues are expected to cross the US$130 billion mark this year. The world sukuk issuance crossed landmark US$100 billion mark in 2012 when a total of US$137.45 billion was raised by corporate year while Cagamas Bhd postponed a US$2.5 billion multi-currency programme.
Domestic sukuk issue are likely to remain healthy with sustained interest from sovereign, corporate and quasi-sovereign issuers.
Recent news suggest Indonesia will see a 20 trillion rupiah retail sukuk in the first-half (1H) of 2015. Others like 1Malaysia Development Bhd (1MDB) could raise as much as RM8.4 billion in the same period.
The local currency sukuk issue pipeline remain healthy with another of Malaysia’s sovereign fund Khazanah Nasional Bhd planning to raise RM1.5 billion from a sukuk programme in 1H of 2015 while low-cost carrier AirAsia Bhd and Bank Islam Malaysia Bhd are each expected to issue RM1 billion worth of sukuk next year.
The IIFM is also spearheading a drive for the standardisation of legal documentation involving the sukuk issuance process driven by the aim to bring greater clarity for investors, issuers and other market participants and facilitate a more robust market.