USD 85 billion Sukuk issued in 2011

GLOBAL SUKUK REVIEW: 2011

$84.4 billion of Sukuk were issued in 2011 across the world, an increase of 62% from the $52 billion issued in 2010. This made the year the best on record in terms of Sukuk issuance according to data compiled by Zawya’s Sukuk Monitor.

Malaysia continued to constitute the main Sukuk market worldwide, followed by the GCC, while sovereign issuers were the main drivers of the growth. The global Sukuk market now stands at $182 billion.

Source: Zawya Sukuk Monitor

Malaysia issued $58 billion or 69% of the total followed by GCC countries which issued a combined total of $19 billion or 23% of the total. New countries that witnessed Sukuk issuance in 2011 were Yemen, Iran and Jordan.  Bahrain managed to maintain a top ranking among Sukuk issuers despite all the unrest witnessed in the kingdom, while the UAE managed to climb the rankings from fifth with $1 billion in 2010 to third with $4.1 billion. Indonesia was the second biggest of issuer of Sukuk in Asia.

Source: Zawya Sukuk Monitor

Government institutions continued to be the main issuers of Sukuk across the globe with $56 billion or 66% of the total. Financial services followed with $15 billion or 17.5%.

Currency breakdown remained in favor of the Malaysian ringgit (MYR), which captured a 66% of the total at $65 billion. This was followed by the Qatari riyal (QAR), which received support from the huge domestic Sukuk issued in January 2011. The US dollar came in third with $8.9 billion or 10% of the total, marking a strong comeback for USD-denominated Sukuk.

New currencies included the Yemeni riyal (YER), Iranian riyal (IRR), Jordanian dinar (JOD) and Chinese yuan (CNY). The year witnessed an increased tendency for GCC issuers to issue in the Malaysian market.

While Sukuk market remained skewed toward domestic markets with $75.8 billion or 89% of the total in 2011, there were 14 international Sukuk worth USD 8.6 billion, up from 11 worth $5 billion in 2010.

Murabaha, Ijara, BBA and Musharaka remained the most used structures followed by Wakala and Istithmar – except that Wakala became a more widely used structure in 2011.

The London Stock Exchange grabbed the biggest number of listed Sukuk issued in 2011 with 10 Sukuk worth $5.1 billion, followed by Bursa Malaysia with five issues worth $3.33 billion.

The top Sukuk issued in 2011 in terms of size included the QAR 33 billion ($9 billion) Qatar Sovereign Sukuk sold in January in the domestic market; Malaysia’s Wakala Global Sukuk with two tranches worth USD 2 billion; Nakheel Sukuk 4; Indonesia Global Sukuk; and SATORP’s Sukuk. The last three were worth $1 billion each.
Sukuk timeline

What follows is a timeline of the major events and developments that took place in 2011 and which shaped the Sukuk industry, some of which are expected to leave their impact and shape the year 2012 as well.

Besides the abundant issuance in 2011, there were a number of announcements that have created a healthy pipeline for 2012. While some countries managed to change their tax regulations to facilitate Sukuk issuance, others initiated the procedures to do so.

Few companies shelved their issuance plans due to unfavorable market conditions and even fewer defaulted on repaying their obligations in 2011. Despite the Arab Spring and the Eurozone debt crisis, we saw a record year of issuance.

Sukuk 2012 Forecasts:

1-      More countries join the club of issuers

2-      New currencies

3-      More cross-border Sukuk

4-      Further innovation in structures

5-      More consolidation

6-      More conventional issuers selling Islamic bonds

7-      More project finance Sukuk

8-      More short term Sukuk

9-      More debates and controversy

10-   More listing, trading and liquidity

11-   More diversification

Source: Zawya Sukuk Monitor