The international sukuk market saw a modest volume of USD 31.1 billion in new sukuk issuances in the first quarter of 2014, according to a newly released report “Global Sukuk Report 1Q2014” by Kuwait Finance House Research Limited (KFHR).
This volume represents a drop of 15.2 percent as compared to the USD 36.73 billion in issuances during 4Q13 and 9.82 percent short of the USD 34.53 billion worth of issuances in 1Q13, it said.
The drop in issuance volume stems from a noteworthy slowdown in the GCC sukuk issuances in 1Q14, particularly in the month of March when the only GCC sukuks issued were the short-term liquidity management sukuks by the Central Bank of Bahrain, it said.
The volume of sukuk issuances in the GCC fell by 12.5 percent in 1Q14 as compared to the volume in 1Q13. Meanwhile, the commencement of tapering by the US Federal Reserve in its quantitative easing (QE) programme since January 2014 is another critical factor behind the decline in 1Q14’s issuance volume, the report added.
The US Fed’s tapering has led to higher funding costs for issuers, particularly in emerging markets, and this has potentially kept the issuers on hold to observe the market first.
Consistent with the trend over past several quarters, the primary sukuk market was led by sovereign and quasi-sovereign issuers who collectively accounted for 81 percent of the global primary sukuk market issuances in 1Q14.
Notably, the sovereign issuers accounted for 68.6 percent or USD 21.3 billion of the total issuances in 1Q14 and this is the highest absolute volume for the sovereign sector since 3Q12 when sovereign issuers had generated USD 25.6 billion in raised proceeds, the KFH report noted.
The corporate sukuk issuances share in 1Q14 declined to USD 5.7 billion which represents a 29.8 percent decrease in comparison to USD 8.1 billion volume during 1Q13 and a 57.1 percent decrease in comparison to the record USD 13.29 billion volume during 4Q13.
Among the notable jurisdictions issuing sukuk in 1Q14 included Maldives as a debutant issuer in the global sukuk market with an inaugural 10-year corporate sukuk issuance worth USD 3.9 million, it added.
Source : KUNA
