Malaysia leads global sukuk issuance

The rapid growth of sukuk over recent years is set to continue, and Malaysia’s strong showing was largely on the back of the issuance of interbank Islamic bills

Malaysia continued to maintain the leadership as the largest issuer of sukuk globally with a total of US$13.9 billion in the first three months of 2019, or a market share of 35.2% from the overall issuance of US$39.5 billion during the period. This also represented an increase of 54.4% compared with US$9 billion that Malaysia issued in the first quarter of 2018.

The 2019 first-quarter figure, according to RAM Ratings, marked a 37.6% growth from the global issuance of US$28.7 billion in the same period of 2018. In March alone, the total issuance amounted to US$12.8 billion.

Indonesia followed Malaysia as the second-largest sukuk issuer with a 17% share or US$6.7 billion, while Saudi Arabia was in third spot with a 15.3% share or US$6.1 billion.

RAM head of Islamic finance Ruslena Ramli describes the increase in global sukuk issuance as a good sign for the pace in the segment performance this year. She cites Indonesia as one of the key markets to watch as the country gears for sovereign sukuk issuances in line with its sustainability agenda, and Saudi Arabia, whose persistent budget deficits may lead to a higher percentage of sukuk in its government funding mix.

Indonesia once again demonstrated its commitment to global sustainable financing when it priced in January its second green sukuk amounting to US$750 million. This followed its inaugural issuance of this asset class in February 2018 amounting to US$1.25 billion – the first ever such transaction from a sovereign issuer.

The higher Malaysian issuance was driven by the BNM interbank Islamic bills (BNIB-i) issuances which was introduced in March 2018 by the financial market committee to support liquidity development for onshore financial markets. RAM envisages the BNIB-i issuances to grow further in 2019, due to its recognition as a high-quality liquid asset.

On the domestic front, the outstanding sukuk rose 10.5% to 880.3 billion ringgit (US$211.10 billion) as at end of March 2019, against 796.6 billion ringgit a year earlier. Sukuk maintained its position as a leader in the overall Malaysian bond market, accounting for 60.9%. Notably, its share has been trending upwards since hitting 50% in 2013.

A total of 22.3 billion ringgit of domestic sukuk was issued in March, bringing the issuance volume to 64.1 billion ringgit at the end of March. Similar to historical trends, the financial services, and infrastructure and utilities sectors were the main drivers of the domestic sukuk market, with respective issuance amount of 11.4 billion ringgit and 3.6 billion ringgit in the first quarter of 2019.