(MENAFN - Kuwait News Agency (KUNA)) The Sukuk market is expected to grow by around 30 percent this year, buoyed by sovereign Sukuk that will continue to dominate, supported by emerging of new countries that issue
Sukuk, according to a recent report by Kuwait Finance House (KFH).
Sukuk issuance will grow this year by 20-30 percent after the momentum witnessed by the issuance process last year that was worth USD 131 billion, the report, compiled by the KFH-Research, showed.
The share of the Middle East of issuance in 2012 increased; especially in Saudi Arabia and UAE, it said, noting that the returns on Sukuk increased during the same year, compared to returns in 2011.
Sukuk remain a major facet of the Islamic finance industry in 2013. The Islamic capital market now stands aflush with more than US 230 billion in outstanding sukuk papers, having developed as a crucial platform for international liquidity and fund raising activities, it said.
Renewed struggles in Europe have hampered growth in advanced economies, leading to capital flows into emerging markets and alternative investments.
Despite this, economic growth in 2012 is estimated to have remained subdued even in emerging economies on the back of lower global demand for goods and services. This sustained sentiment has kept investors in the bond markets in a year that has seen benchmark 10-year US Treasury yields lose 9.3 percent, it said.
In 2012, a total of US 131.2 billion worth of sukuk papers were recorded from the primary market, representing a y-o-y increase of 54.2 percent. The amount dwarfs that of previous years and even represents three times the size of the primary sukuk market pre the global financial crisis. Since 2008, total yearly issuances have grown at a compound annual growth rate of 67.4 percent.
Sovereign issuers led the market share in 2012 despite a record amount of corporate sukuk placed during the year. Total issuances from sovereign entities throughout 2012 reached USD 80.2 billion as compared to US 58.9 billion in 2011, representing a 36.0 percent y-o-y increase.
Despite the dominant market share of 61.1 percent, sovereign papers were overshadowed by significant growth in both corporate and government-related entities which grew by 92.4 percent and 103.0 percent to US 36.5 billion and US 14.5 billion, respectively, the report indicated.
By region, issuances from Central and East Asia continued their growth momentum, climbing by 60.1 percent y-o-y to USD 104.8 billion during 2012. This was led by Indonesia (131.1 percent y-o-y, USD 6.0 billion) and Malaysia (59.4 percent y-o-y, USD 97.1 billion).
Meanwhile, issuances from the Middle East and North Africa also increased by 34.4 percent y-o-y to US 26.3 billion, mainly led by the 278.2 percent y-o-y jump in issuances from Saudi Arabia to USD 10.5 billion and the 49.3 percent y-o-y increase in issuances from the UAE to USD 6.1 billion.
Within the corporate sukuk market, USD 26.8 billion worth of papers or 73.5 percent of total issuances were issued in Malaysia, while US 4.2 billion (11.5 percent) was issued in the UAE and USD 3.4 billion (9.3 percent) was issued in Saudi Arabia, the report concluded.