(MENAFN- Muscat Daily) The rising interest and demand for corporate and infrastructure sukuk issuances in Oman will boost the local capital market, according to global ratings agency Standard & Poor's (S&P).
The growth in issue volumes in the GCC capital markets in 2014 is likely to be steady versus the 2013 rate, although low yields could ultimately push up sukuk issuance, S&P said in a report.
The ratings agency said that it sees a mounting demand for sukuk issuance in the Gulf, including Oman. ''Low interest rates, generally positive economic fundamentals, the implementation of regulation to support capital markets, mounting demand for Islamic finance, and the continued need for infrastructure investment in the GCC countries should fuel capital market growth, in our opinion,'' the report said
Last week, Bank Muscat shareholders approved the RO500mn ‘Meethaq Sukuk Programme,' for the issuance of sukuk by Meethaq in various tranches on the Muscat Securities Market and international markets through public subscription or private placement.
In its budget for 2014, the Oman government announced that it will issue sukuk as part of its RO200mn domestic borrowing programme this year. In November last year, Tilal Development Co raised RO50mn through Oman's first sukuk issuance.
Speaking to Muscat Daily, Karim Nassif, S&P's primary credit analyst, said, ''The general phenomenon we are seeing, across the GCC, is more and more corporate and government-related entities looking away from pure bank borrowings to meet their increasing financing needs, mainly for infrastructure projects. These projects and corporates are considering alternative financing in capital markets, and sukuk is becoming a preferred option. The yield is lower on sukuk, which is attractive for issuers.''
Nassif said that sukuk issuance in markets such as Oman will benefit issuers as well as capital markets. ''There is a lot of demand for sukuk from the investors' community.''
He added that like in other GCC countries, there is a big need of funds for infrastructure projects in Oman and banks alone cannot fulfil all the needs, so corporate and government-related entities need to find other sources. ''Sukuk issuance is a good alternative. GCC governments are also helping by encouraging investment in Islamic finance and capital markets. Oman being a new market for Islamic finance, there will be increasing investor interest in sukuk,'' Nassif
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