Nasdaq Dubai leads the world in Sharia compliant securities with $42 billion of Sukuk bonds

Rick Steves

Sukuk, defined by the Accounting and Auditing Organization for Islamic Financial Institutions as “securities of equal denomination representing individual ownership interests in a portfolio of eligible existing or future assets”, are traded in 18 countries, with only 2 being of non-Muslim majority, the United Kingdom and Hong Kong, issuing Sukuk bonds since 2014. Nasdaq Dubai […]

Nasdaq Dubai leads the world in sharia compliant securities

Sukuk, defined by the Accounting and Auditing Organization for Islamic Financial Institutions as “securities of equal denomination representing individual ownership interests in a portfolio of eligible existing or future assets”, are traded in 18 countries, with only 2 being of non-Muslim majority, the United Kingdom and Hong Kong, issuing Sukuk bonds since 2014.

Nasdaq Dubai has been performing as the top issuer of these Sharia-compliant securities, now with a total volume of $42.31 billion, almost doubling the $24 billion held in January 2015.

The Indonesian government is one of the main issuers in that exchange, with a total of $8.5 billion, having announced two new Sukuk in a sum of $2.5 billion and strengthening Nasdaq Dubai’s position as the largest center for Islamic bond listings.

Essa Kazim, Governor of Dubai International Financial Center (DIFC) said: “These substantial listings confirm the international reach of Dubai’s Islamic capital markets as the emirate accelerates its expansion as the global capital of the Islamic Economy. Our expanding relationship with Indonesia, the world’s most populous Muslim country, strengthens the development of the financial infrastructure of both countries for the benefit of their economies and citizens.”

Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai, said: “The exchange welcomes Sukuk listings from around the world by sovereign issuers as well as multilateral organisations and private entities active in a wide range of industries. As the Sukuk sector expands further we will support its development in every way possible making use of the Islamic capital markets knowledge and expertise available in the UAE.”

Following the Financial Crisis, the global Sukuk market shrunk from $50 billion in 2007 to approximately $14.9 billion in 2008. After booming to a peak of $116.4 billion in issuances in 2014, the Sukuk market has been shrinking again due to the plunging oil prices of 2015, with crude oil still below $40/bbl today, and monetary policy developments in the US and Europe, potentially draining liquidity from global and local markets. Malaysia, as the top issuer in the world, is responsible for a big part of the correction after having stopped listing Sukuk.

Standard & Poor’s Rating Services predicted a figure of $50 or $55 billion of listings in 2016: “We think that if oil prices remain weak, some governments of oil – exporting countries in the Gulf Cooperation Council (GCC) and Malaysia may have no other choice than to reduce investment spending, resulting in lower financing needs and potentially lower issuances (conventional and Islamic). In addition, we think that several issuing countries might decide to go the conventional route, rather the Islamic route, because it is less complex,” S&P stated.

 

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