Sukuk market outpaces conventional bonds

Mixed-chartThe value of the sukuk market in the MENA region, as tracked by S&P’s indices, rose 14% in the first ten months of the year, while the value of the region’s conventional bond market increased just 1% in the same period.

The MENA market for sukuk, which are sharia-compliant investment instruments that resemble bonds, is now worth $37 billion, according to the S&P MENA Sukuk Index. This reflects growth of 37% since the index was established in July 2013.

The UAE is the most active issuer country, accounting for 52% of the index. Saudi Arabia comes second with a 17% market share.

“Overall, governments have continued to diversify their funding platforms,” says Michele Leung, director, fixed income indices at S&P Dow Jones Indices, “and the global sukuk market has witnessed solid support from the lack of primary supply.”

Because they are sharia-compliant, sukuk are favoured by investors that have a mandate to invest according to Islamic principles. Islamic banks and insurers are key buyers for the instruments, many of which buy sukuk when they are issued and hold them to maturity.

Outside of the MENA region, Malaysia is a key country for issuing sukuk.

©2015 funds global mena

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