Following a troubled 2013, with sukuk (Islamic bond) volumes dropping 13%, the global sukuk market will expand again in 2014, partly driven by corporate and infrastructure issuers in the GCC, Standard & Poor's said in a report on Feb 4. The long-term prospects for the sukuk industry remain promising as regulators continue to build and strengthen their frameworks to minimize barriers in the market and deepen liquidity, the ratings agency underscored.
S&P forecasts a double-digit growth in issuance by Gulf corporate and infrastructure entities, amid large infrastructure financing needs. Increasing private issuance could also signal a change in the sukuk market characteristics, S&P noted. The agency, likewise, expects that sovereign sukuk could be slowly emerging as an alternative to fund growth in African countries.
S&P is upbeat on the sukuk industry in Malaysia which reportedly already benefits from a broad sukuk investor base and liquid debt market. The increased interest from issuers, mainly in the Middle East and Asia, in tapping the Malaysian ringgit and US dollar market will continue over the next few years as Malaysia strengthens its leading position in the industry, S&P said. Due to the fact that that Malaysia is adopting private sector investment, S&P believes that non-sovereign issuance could accelerate in 2014-2015, continuing the trend witnessed in 2013 at a global level.
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