Sukuk issuance rises marginally to $92b in first half

DUBAI: S&P Global Ratings has maintained its global sukuk issuance forecast at around $160 billion to $170 billion, following the market’s robust performance in the first half of 2024.

The total issuance reached $91.9 billion during the first six month of 2024, a slight increase from the $91.3 billion a year ago.

A notable development is the 23.8 per cent rise in foreign currency-denominated sukuk issuances, which reached $32.7 billion by June 30, 2024, up from $26.4 billion a year ago.

The main contributors to this increase were issuers from Saudi Arabia, the United Arab Emirates, Oman, Malaysia, and Kuwait.

The improved visibility on the medium-term trajectory of interest rates has been a key factor in benefiting foreign currency-denominated sukuk issuance.

S&P Global Ratings expects the US Federal Reserve to start cutting rates in December 2024, which has been a positive development for the market.

Simultaneously, the increased issuance has been driven by the high financing needs in core Islamic finance countries, particularly for funding ongoing economic transformation programs in Saudi Arabia and the strong growth in the UAE’s non-oil economy.

However, S&P Global Ratings has cautioned that the adoption of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) Standard 62 guidelines, as they have been presented, could potentially disrupt the market.

The rating firm has indicated that this will not affect the 2024 issuance, but it is likely to be a consideration for the market from next year onwards.

Overall, the global sukuk market has maintained its positive momentum in 2024, with foreign currency-denominated issuances leading the way. The improved interest rate outlook and the financing needs of core Islamic finance countries have been the key drivers of this growth.

However, the potential impact of the AAOIFI Standard 62 guidelines will be a factor to watch in the coming year.