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RIYADH: Global sukuk issuance is expected to moderate a bit to settle at $185 billion in 2022, the latest study by Refinitiv revealed. 

According to the 2022 Sukuk Perceptions and Forecast Study released by Refinitiv, around 41 percent of respondents indicated they were still bullish about growth in global sukuk supply.

The report titled “Navigating a new Environment” predicts global Islamic bond issuance to grow at a compound annual growth rate of 6.8 percent over the next five years to reach $257 billion in 2027. 

The size of the sukuk market is expected to reach $1.1 trillion in 2027, growing at a CAGR of 7.9 percent. 

Sukuk supply has reached $726.8 billion in the first six months of 2022, and is projected to increase to $742.3 billion by the end of the year.

Despite strong activity from issuers capitalizing on high demand from international investors early in the year, sukuk issuance started to slow during the first six months of 2022, revealed the report by Refinitiv, a London Stock Exchange Group business.

During the first half of the year, global sukuk issuance reached $100.9 billion, marginally lower than $104.2 billion in the same period last year.

This happened as the Federal Reserve and other central banks kicked off a global monetary tightening cycle. 

The surge in oil prices also contributed to the slowdown in issuance, as it reduced government borrowing needs in core sukuk markets. 

Malaysia, Saudi Arabia and Indonesia remain the largest issuance hubs for sukuk, together accounting for 75 percent of sukuk issued in 2021 and the first half of 2022.

In Saudi Arabia, sukuk raised $28.1 billion in the first half of 2022, compared with $24.2 billion in the same period in 2021, despite soaring oil prices.

Malaysia maintained its leading position, although issuance of $34.8 billion in the first half of 2022 was down 14 percent from the same period last year, as rising commodity prices drove a post-COVID economic recovery. 

Sovereign dominated sukuk issuance, while corporate slowed due to rapidly increasing interest rates.

Sovereigns have maintained around a 60 percent share of global issuance since 2017.

Sovereign sukuk issued in the first half of 2022 amounted to $68.8 billion, 83 percent of which were issued by the Gulf Cooperation Council countries, Malaysian and Indonesian governments. 

Saudi Arabia’s government was the largest sovereign issuer in that period, with $22.1 billion, despite increasing oil prices having reduced government funding requirements. 

Regarding corporate issuance, it amounted to $19.7 billion in the first half of 2022, down 7.8 percent from a year earlier, due to rapidly increasing interest rates. 

The report expects issuance from corporates to moderate by the end of the year.