DUBAI, Jan 19 (Reuters) - S&P Global Ratings said on
Wednesday it expects global sukuk issuance volumes to be flat at
best in 2022, amid decreasing liquidity and rising borrowing
costs, as well as higher oil prices cutting some core Islamic
finance countries' funding needs.
While economic transformation goals such as Saudi Arabia's
Vision 2030 may usher in some sukuk opportunities, S&P sees
volumes at about $145 billion-$150 billion in 2022 from $147.4
billion last year, which fell by $1 billion from 2020.
"Amid a tight job market, accelerated inflation readings
over the past few months, and increasingly hawkish forward
guidance from the U.S. Federal Reserve, we now expect three rate
hikes in 2022, with the first expected in May," S&P said in a
report.
Gulf countries would follow suit with similar rate hikes as
their currencies are pegged to the dollar.
"Notably, we assume a period of higher oil prices, together
with higher production and tighter spending control, will result
in lower financing needs for some core Islamic finance
countries."
The implementation of a regulatory standard last year by
Accounting and Auditing Organization for Islamic Financial
Institutions (AAOIFI) caused "a period of dislocation," with
sukuk issuance dropping 64% in the United Arab Emirates, S&P
said.
Reuters reported in May that the adoption by the United Arab
Emirates of the standards had slowed the issuance of sukuk from
the Gulf, adding to a chronic supply-demand imbalance.
"Although legal solutions were implemented, the change has
negatively affected sukuk issuance appetite from issuers and
investors," the ratings agency said.
S&P said 20 jurisdictions have so far partially or fully
implemented the AAOIFI sharia standards, mostly key players in
the Islamic finance industry, as well as the multilateral
Islamic Development Bank.
But some other large players in the industry have not
adopted them, it added.
"This could exacerbate differences in structures used in
core Islamic finance countries and detract from the broader goal
of a more integrated Islamic finance industry."
(Reporting by Yousef Saba; editing by David Evans)