The issuance of Sharia-compliant bonds in the Arabian Gulf region have slowed by around 15 per cent in the first three quarters of this year and are likely to remain lower than $95.9 billion in 2017 on the back of tightening international liquidity and rising borrowing costs as the US Federal Reserve hikes interest rates.
Sovereigns, financial institutions and the corporate issuers in the region are expected to sell about $70bn to $80bn worth of Shariah-compliant debt in 2018, said Mohammed Damak, senior director and global head of Islamic finance at S&P Global Ratings. The number may climb to as high as $100bn if other sukuk deals are included as part of total sales in 2018, he added.
“Global liquidity is becoming more scarce and more expensive," said Mr Damak who was speaking in Dubai on Tuesday. "The Fed is increasing the rates and the ECB [European Central Bank] will start to reduce its asset purchase programme base…. because of that we think the cost of funding for the issuers is increasing,” he said. “All the liquidity that used to be channelled to emerging markets, including the GCC is, somewhat, reduced because of that.”
Issuers in the GCC, home to about a third of the proven global oil reserves, sold $95.9bn worth of sukuk last year, a 41 per cent year-on-year rise. With re-openings of issues, the number at the end of last year climbed to $118.9bn, a 37.2 per cent jump from a year earlier. The drop in issuances this year is even greater, about 34 per cent, if only foreign currency sukuk transactions are taken into consideration, Mr Damak said.
Lower financing needs of the issuers, especially sovereigns in the region, was cited among the reasons for a slowdown in sukuk sales by S&P.
The GCC, which still relies heavily on the sale of hydrocarbons for revenues to fuel its economies, resorted to raising capital from domestic and international markets in the wake of a three-year oil price slump that began in mid-2014. The price of crude, which fell below $30 per barrel in the first quarter of 2016, has since recovered significantly, breaching $80 per barrel this year. The stability in prices and increased revenues have lowered the financing needs of the Gulf states, which is visible in the sukuk market this year.
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Last year “was a great year for sukuk, underpinned by jumbo issuances from some of the sovereigns in the region,” Mr Damak noted.
In the UAE, the region’s second-biggest economy, sukuk transactions have almost doubled from $3.7bn in 2017 to $6.4bn this year.
Mr Damak expects the global and GCC sukuk markets to maintain the 2018 trends going forward into 2019.
The growth of assets for Islamic banks in the GCC in 2018 has also slowed down considerably and is more or less on par with the conventional banks, he noted.
“We expect that situation to continue in 2019, with around 4 per cent growth of total assets," he said, adding that an increase in the geo-political risk or a significant drop in the oil prices are the two factors that could result in much slower growth in Islamic banking assets in 2019 and beyond.
GCC Shariah-compliant lenders still have good fundamentals and their profitability is adequate at around 1.5 per cent return on assets on average. The headline figure of non-performing loans at Islamic lenders is about 3 per cent, Mr Damak said.
“People were expecting the NPLs to grow after the oil price crash, but paradoxically it did not happen," he said. "What happened was that we saw an increase in the restructuring of loans by the banks to their clients to adapt to the new reality of the economy.”
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Veil (Object Lessons)
Rafia Zakaria
Bloomsbury Academic
Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
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- Priority access to new homes from participating developers
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Recent winners
2002 Giselle Khoury (Colombia)
2004 Nathalie Nasralla (France)
2005 Catherine Abboud (Oceania)
2007 Grace Bijjani (Mexico)
2008 Carina El-Keddissi (Brazil)
2009 Sara Mansour (Brazil)
2010 Daniella Rahme (Australia)
2011 Maria Farah (Canada)
2012 Cynthia Moukarzel (Kuwait)
2013 Layla Yarak (Australia)
2014 Lia Saad (UAE)
2015 Cynthia Farah (Australia)
2016 Yosmely Massaad (Venezuela)
2017 Dima Safi (Ivory Coast)
2018 Rachel Younan (Australia)
Mina Cup winners
Under 12 – Minerva Academy
Under 14 – Unam Pumas
Under 16 – Fursan Hispania
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Youth YouTuber Programme
The programme will be presented over two weeks and will cover the following topics:
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Muguruza's singles career in stats
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GOLF’S RAHMBO
- 5 wins in 22 months as pro
- Three wins in past 10 starts
- 45 pro starts worldwide: 5 wins, 17 top 5s
- Ranked 551th in world on debut, now No 4 (was No 2 earlier this year)
- 5th player in last 30 years to win 3 European Tour and 2 PGA Tour titles before age 24 (Woods, Garcia, McIlroy, Spieth)
Volvo ES90 Specs
Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)
Power: 333hp, 449hp, 680hp
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Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
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7.30pm: Jebel Hafeet – Maiden (TB) Dh80,000 (T) 1,400m
Jetour T1 specs
Engine: 2-litre turbocharged
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