The moderate growth in sukuk issuances in the first quarter underpins continued investor interest, but it also points out to structural constraints, inhibiting faster uptake of Islamic bonds as an asset class, according to Fitch Ratings.
The total volume of sukuk rated by Fitch for the three-month period through to March end, stood at $80 billion (Dh294bn), a 6 per cent rise from the figures recorded at the of 2017, the rating agency said in a report released on Tuesday. New sukuk issuance with a maturity of more than 18 months from the Arabian Gulf states, Malaysia, Indonesia, Turkey and Pakistan came in at $14.9bn for the first quarter of 2018, a modest 1 per cent year-on-year rise.
“Seasonal patterns will affect quarterly issuance, which may pick up in the second half of the year following Ramadan and the summer break,” Fitch noted. “If the first quarter rates of growth are broadly maintained over the course of 2018, the annual increase in outstanding volumes would be broadly consistent with that seen in recent years.”
The issuances during the first quarter of 2018 were largely driven by the GCC region, whose funding needs are likely to fall if oil prices stay high. The sovereigns, though, may choose to issue more Islamic bonds as part of their efforts to deepen their local debt markets and diversify funding sources for themselves and the corporate borrowers in the region.
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Dana Gas reaches agreement on $700m sukuk restructuring
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Corporate borrowers, financial institutions, government related entities and sovereigns in the region have increasingly looked at tapping the sukuk market for their funding needs in the recent quarter and more are lined up to test the markets this year.
Saudi Arabia, the region’s biggest economy and the world’s top oil exporter, is poised to raise funds by selling sharia-compliant bonds as soon as the market conditions allow, Reuters cited the head of kingdom’s Debt Management Office Fahad Al Saif as saying in March. The kingdom last year raised $9bn through sovereign sukuk issuances.
Issuer funding needs and investor appetite for the remainder of the year will, however, be determined by factors including oil prices and tighter global financing conditions. Investor sentiment may also be vulnerable to geo-political tensions in the Middle East and the pace of US monetary policy tightening, according to Fitch.
Although Islamic bond issuances remain on upward trajectory, standardisation in the industry remains a significant challenge, which has crimped the rate of expansion for sukuk as an asset class, Fitch noted.
“We think that structural constraints mean growth may be steady but
unspectacular,” it said. “Greater standardisation …. would help sukuk gain wider acceptance among international investors, especially if it helped set out rights and obligations in all circumstances.”
The challenges facing sukuk as an asset class, which include the potential for variations in interpretation of sharia principals and a lack of legal precedent, were highlighted by Sharjah energy firm Dana Gas's attempt to have its mudaraba sukuk declared unlawful on the grounds that it is not sharia-compliant, Fitch said.
The company earlier this month said it had reached an agreement with the ad-hoc committee of sukukholders on a restructuring and refinancing offer for its $700 million sukuk, subject to the consent of shareholders and sukukholders.
UAE currency: the story behind the money in your pockets
Defence review at a glance
• Increase defence spending to 2.5% of GDP by 2027 but given “turbulent times it may be necessary to go faster”
• Prioritise a shift towards working with AI and autonomous systems
• Invest in the resilience of military space systems.
• Number of active reserves should be increased by 20%
• More F-35 fighter jets required in the next decade
• New “hybrid Navy” with AUKUS submarines and autonomous vessels
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
Profile
Company name: Jaib
Started: January 2018
Co-founders: Fouad Jeryes and Sinan Taifour
Based: Jordan
Sector: FinTech
Total transactions: over $800,000 since January, 2018
Investors in Jaib's mother company Alpha Apps: Aramex and 500 Startups
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Company profile
Name: GiftBag.ae
Based: Dubai
Founded: 2011
Number of employees: 4
Sector: E-commerce
Funding: Self-funded to date
About Karol Nawrocki
• Supports military aid for Ukraine, unlike other eurosceptic leaders, but he will oppose its membership in western alliances.
• A nationalist, his campaign slogan was Poland First. "Let's help others, but let's take care of our own citizens first," he said on social media in April.
• Cultivates tough-guy image, posting videos of himself at shooting ranges and in boxing rings.
• Met Donald Trump at the White House and received his backing.
UK's plans to cut net migration
Under the UK government’s proposals, migrants will have to spend 10 years in the UK before being able to apply for citizenship.
Skilled worker visas will require a university degree, and there will be tighter restrictions on recruitment for jobs with skills shortages.
But what are described as "high-contributing" individuals such as doctors and nurses could be fast-tracked through the system.
Language requirements will be increased for all immigration routes to ensure a higher level of English.
Rules will also be laid out for adult dependants, meaning they will have to demonstrate a basic understanding of the language.
The plans also call for stricter tests for colleges and universities offering places to foreign students and a reduction in the time graduates can remain in the UK after their studies from two years to 18 months.
Marathon results
Men:
1. Titus Ekiru(KEN) 2:06:13
2. Alphonce Simbu(TAN) 2:07:50
3. Reuben Kipyego(KEN) 2:08:25
4. Abel Kirui(KEN) 2:08:46
5. Felix Kemutai(KEN) 2:10:48
Women:
1. Judith Korir(KEN) 2:22:30
2. Eunice Chumba(BHR) 2:26:01
3. Immaculate Chemutai(UGA) 2:28:30
4. Abebech Bekele(ETH) 2:29:43
5. Aleksandra Morozova(RUS) 2:33:01
THE BIO
Age: 30
Favourite book: The Power of Habit
Favourite quote: "The world is full of good people, if you cannot find one, be one"
Favourite exercise: The snatch
Favourite colour: Blue
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
Huddersfield Town permanent signings:
- Steve Mounie (striker): signed from Montpellier for £11 million
- Tom Ince (winger): signed from Derby County for £7.7m
- Aaron Mooy (midfielder): signed from Manchester City for £7.7m
- Laurent Depoitre (striker): signed from Porto for £3.4m
- Scott Malone (defender): signed from Fulham for £3.3m
- Zanka (defender): signed from Copenhagen for £2.3m
- Elias Kachunga (winger): signed for Ingolstadt for £1.1m
- Danny WIlliams (midfielder): signed from Reading on a free transfer
The specs
Engine: 3.9-litre twin-turbo V8
Transmission: seven-speed
Power: 620bhp
Torque: 760Nm
Price: Dh898,000
On sale: now