March 24, 2019

GCC corporate and infrastructure Sukuk issuance to remain muted, says S&P Ratings

S&P Ratings has announced that GCC corporate and infrastructure Sukuk issuance volumes will remain suppressed in Q2 2018.

The GCC region has a good number of Islamic banks that are frequent Sukuk issuers however the number of corporate issuers that tap into the Sukuk space remains small resulting in volatile annual volumes of issuance, said S&P.

In a report, S&P noted that 50 per cent of the $7.6 billion raised by GCC corporate and infrastructure issuers last year was driven by the activities of Saudi Aramco, which raised SAR 11.25 billion and Investment Corporation of Dubai which raised $1 billion and there are no similar-sized transactions so far in 2018.

span>Additionally, GCC banks continue to offer credit at favourable terms to corporates as a result of the improved liquidity in 2017 and 2018 no major changes will be expected in this picture over the next 12 months because lending growth will remain muted and local liquidity strong.

This is being driven by stabilisation of oil prices, large issuances by select sovereigns that injected the liquidity locally as well as muted loan growth.

S&P also expects GCC corporates remain cautious, translating into muted investment programmes in some sectors due to a number of developments in the region ranging from introduction of the value-added tax, energy subsidy reforms as well as other government revenue-enhancing initiatives that has created pressure and uncertainty for some sectors.

Internationally, investors' appetite for GCC issuance has dropped lately due to international political and economic uncertainty these include the recent reinstatement of US sanctions on Iran, the continued animosity between Iran and some of its GCC neighbours, as well as global economy wars that are not supportive of emerging capital markets.

Original Article

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