KUALA LUMPUR: The Sukuk market will grow over the remainder of 2024 due to funding and refinancing demands, diversification, the development of the debt capital market (DCM), and reduced rates, according to Fitch Ratings.

The rating agency said sukuk continues to be an important financing mechanism in markets like Malaysia, Indonesia, Turkiye, Pakistan, and the Gulf Cooperation Council (GCC) albeit with slowed growth from the first quarter (Q1) of 2024.

Its global head of Islamic Finance, Bashar Al Natoor, said around 80 per cent of the GCC sukuk is now investment-grade, and the GCC DCM is well on its way to crossing US$1 trillion outstanding.

Bashar said Malaysia is still the largest sukuk market globally, with around 60 per cent of its ringgit Debt Capital Markets (DCM) in sukuk.

"Saudi Arabia, the UAE, and Malaysia will likely stay among the most active sukuk issuers," he said in a statement.

Fitch rates about US$185 billion of global sukuk outstanding, around 80 per cent of which are investment-grade. The share of sukuk issuers with a positive outlook expanded to 8 per cent in Q1 2024, and there were no notable sukuk defaults.

GCC countries account for 35 per cent of the global outstanding sukuk. GCC DCM reached US$940 billion outstanding (sukuk share: 37 per cent) at the end of Q1 2024. 

GCC banks issued more US dollar debt (sukuk share: 51 per cent) in Q1 2024 than in full-year 2023. 

"Corporates and projects will likely stay reliant on bank funding, but the government push to develop the DCM and reduce bank reliance could drive sukuk issuance," said Fitch Ratings. 

Meanwhile, Fitch Rating said the global outstanding sukuk expanded 10 per cent year on year (YoY), to US$867 billion at the end of Q1 2024. 

The GCC, Malaysia, Indonesia, Turkiye, and Pakistan (including multilaterals) issued similar levels of sukuk over Q1 2024, totalling US$56.8 billion (all currencies). Bond issuance fell by 24.3 per cent, it added.

https://www.nst.com.my/business/corporate/2024/04/1039850/ malaysia-still-largest-sukuk-market-globally