GCC Sukuk issuance drops 15% in 2018 on rising cost of borrowings, S&P says - The National

GCC Sukuk issuance drops 15% in 2018 on rising cost of borrowings, S&P says - The National:

The issuance of Sharia-compliant bonds in the Arabian Gulf region have slowed by around 15 per cent in the first three quarters of this year and are likely to remain lower than $95.9 billion in 2017 on the back of tightening international liquidity and rising borrowing costs as the US Federal Reserve hikes interest rates.

Sovereigns, financial institutions and the corporate issuers in the region are expected to sell about $70bn to $80bn worth of Shariah-compliant debt in 2018, said Mohammed Damak, senior director and global head of Islamic finance at S&P Global Ratings. The number may climb to as high as $100bn if other sukuk deals are included as part of total sales in 2018, he added.

“Global liquidity is becoming more scarce and more expensive," said Mr Damak who was speaking in Dubai on Tuesday. "The Fed is increasing the rates and the ECB [European Central Bank] will start to reduce its asset purchase programme base…. because of that we think the cost of funding for the issuers is increasing,” he said. “All the liquidity that used to be channelled to emerging markets, including the GCC is, somewhat, reduced because of that.”