Global Sukuk issues fell 16 percent in the first seven months of this year, hurt by a downturn in Gulf Cooperation Council (GCC) countries, where economic conditions are still challenging, but the outlook for the Islamic bond market remains positive. Standard & Poor's said in a report on Wednesday that new issuance of Sukuk, or Islamic bonds, fell to $9.3 billion in the year to July 31, down from $11.1 billion in the comparable period in 2008. “The medium-term outlook for the Sukuk market remains positive, though, in our view, given the strong pipeline - with Sukuk announced or being talked about in the market estimated at about $50 billion - and efforts to resolve the major difficulties impeding Sukuk market development,” S&P credit analyst Mohamed Damak said in a statement. London-based Islamic Finance Information Service (IFIS) said this week that while the decline in Sukuk issue was most significant in the GCC, a recovery in the Gulf is expected in the first quarter of 2010. “In the GCC, three main issues are hindering the revival of the Sukuk market, namely, troubled Kuwaiti investment companies, the real estate market in the UAE, and the availability of credit in Saudi Arabia,” IFIS said in a statement. Malaysia led Sukuk issuance, accounting for about 45 percent of all deals in the first seven months. Saudi Arabia contributed 22 percent. IFIS said Southeast Asia returned to dominate the Sukuk market this year, with total issuance reaching $7.8 billion, or 88 percent of all issuance in the first half of the year. In the GCC, Sukuk totaled $1.1 billion, accounting for 12 percent of the global total. S&P said “major hurdles” remain on the path of Sukuk development, such as market conditions, lack of standardization - notably when its comes to interpreting Shariah law - and the low liquidity of the Islamic bond market.
