With economies battling Covid-19 crisis, global sukuk issuance in 2020 may see additional sovereign Sukuk to support fiscal stimulus

The global sukuk market delivered a noteworthy performance in 2019, notching up USD130.2 bil of gross issuance – a 41.6% jump from USD91.9 bil the previous year. The top five countries by incremental value were Turkey (+320.4%), Qatar (+62.2%), Malaysia (+57.7%), Bahrain (+45.1%) and Indonesia (+26.2%). Even though issuance by non-core markets surged 138% to USD13.3 bil last year (2018: USD5.6 bil), the global sukuk market remained dominated by the Gulf Cooperation Council (GCC, 40%), Malaysia (34%) and Indonesia (15%).

In terms of sovereigns, Saudi Arabia maintained its lead in the global sovereign sukuk market with a 28.9% (USD21.4 bil) share, followed by Indonesia (25.3% or USD18.7 bil), Malaysia (18.5% or USD13.7 bil) and Turkey (USD7.0 bil or 9.5%). The primary fund-raising purpose was to support the respective countries’ budget deficits. In terms of corporate sukuk issuance, the top position was retained by Malaysia with USD31.2 bil (or a 55.3% share). The UAE came next with USD9.8 bil (17.3%), followed by Saudi Arabia (USD9.1 bil or 16.2%) and Qatar (USD2.1 bil or 3.6%).

Going further into 2020, it is clear that the COVID-19 pandemic has wreaked havoc on every aspect of life, with no clear end in sight to date on how long the crisis will last. Undoubtedly, markets have been in turmoil and this will likely pose uncertainties with regard to future fund-raising activity. With governments worldwide still weighing the economic implications of COVID-19, various forms of financial aid through economic stimulus packages and interest rate cuts have been announced.