Continued low oil prices are unlikely to have the kind of positive effect on sukuk issuance that many in the market were predicting, according to the credit ratings agency Standard & Poors (S&P).
The agency said on Sunday that “sukuk issuance will remain subdued over the next six to 18 months” despite S&P expecting oil prices to remain low during the same period and to stabilise at US$50 per barrel from 2018 onwards.
S&P is predicting a slowdown in sukuk sales in the second half of this year, with global issuance hovering this full year in the range of $50bn to $55bn compared with $63bn last year.
Sukuk issuance in the first half of this year fell by 12.5 per cent compared with the same period last year – to $33.5bn from $38.4bn. Mohamed Damak, the global head of Islamic Finance for S&P, said that when the oil price decline began in 2014, "there were a lot of commentators who said it would be fantastic news for the sukuk market because the governments of the GCC and elsewhere will keep spending", relying on issuance of more sukuk to finance this.
He said that $8.6bn was issued locally during the first half of this year – a 16 per cent decline on the $10.2bn last year.
At the same time, the use of traditional debt in the GCC has spiralled – increasing by 183 per cent in the first half of this year to $36.9bn compared with $14.8bn in the same period last year. The increase is the result of debt issuances by the governments of Abu Dhabi and Saudi Arabia.
The main reason that governments use conventional bonds to raise finance over sukuk is that sukuk is more complex.
“If you put yourself in the shoes of a minister of finance and you need $1bn immediately, you have two options,” said Mr Damak. “The first is to take one standardised set of documents off a shelf, put $1bn on the document and go and hit the market. That could literally take a few hours or a few days.”
By comparison, he said, sukuk transactions take longer, as even regular issuers need to identify an asset to use in a transaction, set up a structure and then gain approval that it is Sharia-compliant from scholars and lawyers.
He said sukuk issuance could be increased by encouraging standardisation of documents and structures. He also said that future issuance this year could be affected negatively by the US Federal Reserve raising interest rates, which will suck liquidity from the market.
Alternatively, issuance could be boosted by the European Central Bank embarking on quantitative easing, which means capital markets will seek investments with positive yield. Many European bonds are trading at negative yields amid negative interest rates and fallout from Brexit.
In April, the ratings agency Fitch said global sukuk issuance hit a record in the first quarter of $11.1bn – up 21 per cent on a year earlier. It said the amount issued was higher than average in five of the past six quarters. It expected a busy second quarter, ahead of a quieter third quarter as Ramadan and the summer break began. “Our expectation is for 2016 sukuk issuance to at least match 2015 issuance,” Fitch’s report said.
mfahy@thenational.ae
Follow The National's Business section on Twitter
COMPANY PROFILE
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
The specs
Engine: 5.0-litre V8
Power: 480hp at 7,250rpm
Torque: 566Nm at 4,600rpm
Transmission: 10-speed auto
Fuel consumption: L/100km
Price: Dh306,495
On sale: now
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Klipit%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202022%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Venkat%20Reddy%2C%20Mohammed%20Al%20Bulooki%2C%20Bilal%20Merchant%2C%20Asif%20Ahmed%2C%20Ovais%20Merchant%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Dubai%2C%20UAE%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20Digital%20receipts%2C%20finance%2C%20blockchain%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EFunding%3A%3C%2Fstrong%3E%20%244%20million%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Privately%2Fself-funded%3C%2Fp%3E%0A
Company%20Profile
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Cargoz%3Cbr%3E%3Cstrong%3EDate%20started%3A%3C%2Fstrong%3E%20January%202022%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Premlal%20Pullisserry%20and%20Lijo%20Antony%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Dubai%3Cbr%3E%3Cstrong%3ENumber%20of%20staff%3A%3C%2Fstrong%3E%2030%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%3C%2Fstrong%3E%20Seed%3C%2Fp%3E%0A
Jigra
Starring: Alia Bhatt, Vedang Raina, Manoj Pahwa, Harsh Singh
Joker: Folie a Deux
Starring: Joaquin Phoenix, Lady Gaga, Brendan Gleeson
Director: Todd Phillips
Rating: 2/5
Abu Dhabi World Pro 2019 remaining schedule:
Wednesday April 24: Abu Dhabi World Professional Jiu-Jitsu Championship, 11am-6pm
Thursday April 25: Abu Dhabi World Professional Jiu-Jitsu Championship, 11am-5pm
Friday April 26: Finals, 3-6pm
Saturday April 27: Awards ceremony, 4pm and 8pm
Moon Music
Artist: Coldplay
Label: Parlophone/Atlantic
Number of tracks: 10
Rating: 3/5
Company%20Profile
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Hoopla%3Cbr%3E%3Cstrong%3EDate%20started%3A%20%3C%2Fstrong%3EMarch%202023%3Cbr%3E%3Cstrong%3EFounder%3A%3C%2Fstrong%3E%20Jacqueline%20Perrottet%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Dubai%3Cbr%3E%3Cstrong%3ENumber%20of%20staff%3A%3C%2Fstrong%3E%2010%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%20%3C%2Fstrong%3EPre-seed%3Cbr%3E%3Cstrong%3EInvestment%20required%3A%3C%2Fstrong%3E%20%24500%2C000%3C%2Fp%3E%0A
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
Titanium Escrow profile
Started: December 2016
Founder: Ibrahim Kamalmaz
Based: UAE
Sector: Finance / legal
Size: 3 employees, pre-revenue
Stage: Early stage
Investors: Founder's friends and Family
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Revibe%20%0D%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202022%0D%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Hamza%20Iraqui%20and%20Abdessamad%20Ben%20Zakour%20%0D%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20UAE%20%0D%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20Refurbished%20electronics%20%0D%3Cbr%3E%3Cstrong%3EFunds%20raised%20so%20far%3A%3C%2Fstrong%3E%20%2410m%20%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EFlat6Labs%2C%20Resonance%20and%20various%20others%0D%3C%2Fp%3E%0A
MATCH INFO
Inter Milan v Juventus
Saturday, 10.45pm (UAE)
Watch the match on BeIN Sports
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
Essentials
The flights
Whether you trek after mountain gorillas in Rwanda, Uganda or the Congo, the most convenient international airport is in Rwanda’s capital city, Kigali. There are direct flights from Dubai a couple of days a week with RwandAir. Otherwise, an indirect route is available via Nairobi with Kenya Airways. Flydubai flies to Kinshasa in the Democratic Republic of Congo, via Entebbe in Uganda. Expect to pay from US$350 (Dh1,286) return, including taxes.
The tours
Superb ape-watching tours that take in all three gorilla countries mentioned above are run by Natural World Safaris. In September, the company will be operating a unique Ugandan ape safari guided by well-known primatologist Ben Garrod.
In the Democratic Republic of Congo, local operator Kivu Travel can organise pretty much any kind of safari throughout the Virunga National Park and elsewhere in eastern Congo.
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
The Great Derangement: Climate Change and the Unthinkable
Amitav Ghosh, University of Chicago Press