Thomson Reuters released today (20 November) the findings of its second consecutive Sukuk Perceptions and Forecast Study conducted by Thomson Reuters and Zawya.
The study is based on a survey of Sukuk lead arrangers and investors, predominantly based in Islamic markets in MENA and South East Asia, conducted in August and September 2013. The primary empirical data gathered from the survey was subsequently developed to provide forward-looking analytics on the appetites and preferences of Sukuk investors for 2013 and beyond.
Russell Haworth, Managing Director, Middle East & North Africa, Thomson Reuters, said, “Studies such as this one continue to take stock of the challenges and issues affecting Sukuk by providing important and much-needed overview and analysis of the Sukuk global market. In order to increase issuance and liquidity of the Islamic capital market there is a need for practical studies that address its challenges, and that provide a clearer picture of its current and forecasted status.”
Overall, the study found that the potential demand and supply pipeline of Sukuk is expected to grow. Despite this increase, demand is still expected to outstrip supply substantially until 2014, when it is predicted supply will begin to outpace supply.
- Total global outstanding Sukuk stands at $237 billion, with around $100 billion Sukuk issued in 2013, and are expected to grow to $749 billion by 2018
- The Sukuk supply and demand gap is expected to reach its peak by 2014 amounting to $230 billion.
- The gap is expected to then drop steadily as market issuance is predicted to reach $187 billion by 2018.
- On the demand side, investors expect 50 percent of their portfolios to be allocated to Islamic finance investments, out of which 25 per cent to 35 per cent, would be allocated to Sukuk
- MENA investors overwhelmingly prefer USD Sukuk
- Investors view Oman as the most attractive emerging Islamic finance market for Sukuk investment while lead arrangers also expect that most Sukuk will be issued from the Sultanate.
The Annual Sukuk Perceptions and Forecast Study is part of Thomson Reuters’ new information solution catering to the growing need for better access to Islamic finance investments and markets, Zawya Islamic – a unique first of its kind solution for Islamic finance and Shariah-sensitive investors. Zawya Islamic will be an add-on to Zawya Markets – the leading Middle East and North Africa business information and investment opportunities solution.
Powered by data from Thomson Reuters and partnering with global Shariah and Islamic Finance market players, standard setters and authorities, Zawya Islamic makes Shariah-compliant investment, decision making and networking with the Islamic markets easier amalgamating:
Fatawa, standards, regulations, legal documentation and product guidance notes, intelligently connected with scholars and instruments;
Deep fundamental data on global Sukuk, Islamic funds, Islamic banks, financial institutions and Shariah-compliant equities;
Islamic finance news, research, indices, money market and benchmark rates;
The Islamic Finance Development Indicator and the Islamic Finance Gateway Community.
Dr. Sayd Farook, Global Head of Islamic Capital Markets for Thomson Reuters, said, “Although the Sukuk global market in 2013 has slowed down in terms of new issuance, we see positive signs in 2014.
We expect the appetite for Sukuk to increase in 2014 as cross-border Sukuk issuances continue to gainmomentum. Critically, we are seeing increased support from governments with a number of countries finalizing regulations to allow the issuance of Sukuk in their local markets. Countries such as Morocco, Nigeria, Oman, South Africa and Tunisia have also shown great interest in issuing sovereign Sukuk in 2014 to finance infrastructure projects.
“Despite the healthy outlook for 2014, several Sukuk market challenges remain unresolved.Deficiencies still persist in the areas of transparency, standardization, and liquidity in the secondary market due to limited trading mechanisms and the different treatment of certain Sukuk structures in different jurisdictions.”
“Noticeably, both sellers and buyers favour North African countries such as Tunisia, Libya, Morocco and Egypt to issue and invest in Sukuk. All these North African jurisdictions have signaled greater interest and support for Islamic finance post-Arab Spring, and are working to establish new frameworks and/or strengthen current structures for Islamic finance.”
Sponsored by Emirates NBD Bank, Barwa Bank and Azzad Asset Management, the Sukuk Perceptions and Forecast Study 2014 will be launched at the Global Islamic Economy Summit, organised by Thomson Reuters and the Dubai Chamber of Commerce & Industry, on 25th & 26th November 2013 in Dubai, United Arab Emirates. For more information and to register for the event, please visit www.globalislamiceconomy.com.