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Tuesday, 23 August 2016

Fitch: Index Move Boosts Sukuk; Frameworks & Standards Still Key | Reuters

Fitch: Index Move Boosts Sukuk; Frameworks & Standards Still Key | Reuters:

"The inclusion of sukuk in major bond indexes would be a significant boost for the product, but initiatives to harmonise standards, structures and legal frameworks and improve transparency remain key to its long-term development, Fitch Ratings says. Reuters reported on Friday that JP Morgan would include eight sovereign and corporate sukuk in various bond indexes from 31 October this year, citing a research report that the bank had sent to its clients. If confirmed, index inclusion should raise the profile of sukuk and support inflows from international institutional investors, including index tracking funds. This in turn may encourage issuers to supply index-eligible sukuk (criteria for inclusion include a credit rating and a liquidity assessment, according to Reuters) and support secondary market liquidity. Nevertheless, we believe the sukuk market's growth rate will be determined by two factors: firstly, product-specific initiatives around regulation and standardisation of sukuk issuance, which have been noteable in some jurisdictions, but have not always been harmonised across jurisdictions; and secondly, the broader attempts to deepen the investor base and improve transparency in the relevant national and regional debt capital markets. "

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