Malaysia moves into pole position as sovereign sukuk issuer in 1Q 2021

Despite the economic challenges wrought by the COVID-19 pandemic, the global sukuk market recorded a 21.2% y-o-y increase in issuance to USD42.3 bil in 1Q 2021 (1Q 2020: USD34.9 bil). Malaysia led this global issuance with a 42.4% market share (USD17.9 bil), followed by Saudi Arabia (30.6% or USD12.9 bil), Indonesia (16.5% or USD7.0 bil)), Turkey (5.4% or USD2.2 bil) and Kuwait (2.8% or USD1.2 bil). Cumulatively, these five countries’ sukuk issuance took up the lion’s share of 97.7% of global sukuk issuance. The above are amongst the key findings outlined in RAM Ratings’ latest Sukuk Snapshot 1Q2021 commentary.

Sovereigns continued to drive the sukuk market in 1Q 2021, accounting for 60.7% (USD25.7 bil) of overall global sukuk issuance. Corporate and quasi-government issuance made up the other 39.3% (USD16.6 bil). The key markets of Malaysia (+39.8% y-o-y) and Indonesia (+89.2%) charted impressive advancement in sukuk issuance. 

At the same time, the environmental, social and governance (ESG) segment made further inroads, with Malaysia making its debut through the world’s first sovereign sustainability sukuk. On 28 April 2021, the country issued its USD800 million 10-year sustainability trust certificates and a USD500 million 30-year tranche. This maiden sukuk via a special-purpose vehicle — Malaysia Wakala Sukuk — is in line with the Government of Malaysia’s recently launched Sustainability Development Goals Sukuk Framework. 

“The common philosophies between ESG-related instruments and Islamic finance will continue to serve as a bridge for sukuk in becoming a mainstream source of financing,” highlights Siew Suet Ming, technical director of RAM Ratings. The Indonesian government is the world’s most prolific issuer of green sukuk to date, having gone to the market with four green sukuk issues, with a cumulative issuance value of USD2.8 bil as at end-2020.

By contrast, the GCC region posted a 12.7% decline in sukuk issuance to USD14.4 bil in 1Q 2021 (1Q 2020: USD16.5 bil), as more issuers in the region had shifted to conventional bonds. Nonetheless, the 13.6% rise in sovereign issuance to USD9.2 bil (1Q 2020: USD8.1 bil) could not compensate for the 37.3% plunge in corporate and quasi-government issuance to USD5.2 bil (1Q 2020: USD8.3 bil). Listed as the world’s largest sustainability and ESG sukuk to date, Islamic Development Bank’s inaugural USD5.2 bil sukuk programme was the sole issue from GCC’s corporate and quasi-government sector. 

Outlook for sovereign sukuk issuance in the GCC region will chiefly be determined by oil prices, with the uncertainty over the containment of the coronavirus pandemic and the progress of global vaccination programmes influencing demand for crude oil. These factors are likely to shape the GCC’s fiscal policies and the contingent impact on near-term government expenditure. 

RAM’s Sukuk Snapshot is designed as a quick reference point for sukuk data and trends. This publication aims to serve the needs of market practitioners, enabling them to monitor global and Malaysian sukuk market developments. Subscribers can retrieve the Sukuk Snapshot via our website, www.ram.com.my. Non-subscribers may purchase the report at RM500 per copy. 

Published on 16 June 2021

Access the full report here

Analytical contact

Siew Suet Ming

(603) 3385 2585

suetming@ram.com.my

Media contact

Padthma Subbiah

(603) 3385 2577

padthma@ram.com.my

Publication Sales

AIN Sulaiman/Faiez Zulkifli

(603) 3385 2596/2597

ain@ram.com.my

faiez@ram.com.my

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad

© Copyright 2021 by RAM Rating Services Berhad