2020 sukuk volumes resilient to coronavirus stress - Fitch

Fitch Ratings-Dubai/London-21 October 2020: The volumes of sukuk issuance in the full-year 2020 are expected to be similar to 2019 levels, despite the unprecedented stress from the coronavirus pandemic, Fitch Ratings says. As market conditions further recover, sukuk supply is expected to increase with increased funding needs.

Sovereigns are expected to remain the major contributors to overall sukuk volumes as they face widening fiscal deficits and high borrowing needs, caused by coronavirus-related economic disruptions and lower oil prices. Issuance from financial institutions and corporates is also set to increase as they face challenging business conditions and take advantage of lower funding costs.

Sukuk issuance with a maturity of more than 18 months from the Gulf Cooperation Council region, Malaysia, Indonesia, Turkey and Pakistan reached USD10.5 billion in 3Q20, 14.2% lower than the previous three months. The volume of outstanding Fitch-rated sukuk reached USD116.2 billion at end-3Q20.

The volume of outstanding Fitch-rated Green & Sustainability sukuk reached USD7.2 billion at end-3Q20. Despite the modest growth, the Green & Sustainable sukuk market is still in its infancy and not likely to become a sizeable part of the sukuk market in the short term.